First Republic Bank (NYSE: FRC)

When it comes a stock hitting a 52-week high, I always say I prefer to look for stocks that are hitting a “new” high. To me, this would be a stock that hasn’t hit a new 52-week high in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher, it was a key breakout.

First Republic Bank, together with its subsidiaries, provides personalized relationship-based preferred banking and business banking, real estate lending, trust, and wealth management services to clients in metropolitan areas of the United States. Its deposit products include checking, money market checking, savings, and passbook deposits, as well as certificates of deposit. The company’s loan portfolio comprises residential mortgage loans and lines of credit, commercial real estate loans, residential construction loans, small business loans, personal loans, and Eagle One lines of credit. It also provides wealth management services including investment strategies and products, trust and custody services, full service and online brokerage, financial and estate planning, access to alternative investments, socially responsible investing, and foreign exchange. The company offers its products and services through 63 offices, including 58 preferred banking licensed deposit-taking offices in 8 metropolitan areas, such as San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, New York City, Boston, Portland and 5 offices in Santa Barbara, Honolulu, Seattle, Salem, and Las Vegas that offer exclusively lending, wealth management, and trust services.

To review First Republic’s stock, please take a look at the 1-year chart of FRC (First Republic Bank) below with my added notations:

FRC had been trading mostly sideways for the last 6-7 months, while running into resistance at $34 (red). After a quick sell-off in May, the stock has worked its way back up to that $34 level. The $34 resistance meets my definition of a clear resistance level that would be an important 52-week high breakout if FRC could manage to break above it.  The stock also seems to find support at $32 (blue) quite often.

The Tale of the Tape: A long trade could be entered on FRC if it breaks above $34, with a stop set below that level. A long position could also be entered on a pullback to the $32 level, which could then be added to if the stock breaks out to the new high.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT