Conclusion, Investment Implications, Strategy

First Republic Bank (FRC) appears to be resuming its late September advance following a recent test of underlying support at its 50-day moving average amid emerging recent relative outperformance versus the benchmark S&P 500 (SPX).  A sustained rise above the 128.73 area amid continued relative outperformance would confirm this and target a potential 15% rise to $155.00 per share.

Analysis and Rationale

First Republic Bank (FRC), together with its subsidiaries, provides private banking, private business banking, real estate lending, and wealth management services to clients in metropolitan areas in the United States. It operates through two segments, Commercial Banking and Wealth Management. As of December 31, 2019, the company offered its services through 89 offices, including 78 licensed deposit-taking offices in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, and San Diego, California; Portland, Oregon; Boston, Massachusetts; Palm Beach, Florida; Greenwich, Connecticut; New York, New York; Jackson; and Wyoming, as well as 11 offices that provided lending, wealth management, and trust services. First Republic Bank was founded in 1985 and is headquartered in San Francisco, California.

Chart 1 below plots FRC daily since August in the upper panel along with its 200- and 50-day moving averages, with an accompanying chart of FRC’s relative performance versus the S&P 500 (SPX) and its 63-day (quarterly, our Strategic time frame) moving average in the lower panel.

The upper panel shows that KRC is currently rebounding from a Dec 11th test of its 50-day moving average, a widely-watched minor trend proxy.  Meanwhile,the lower panel shows that KRC’s trend of quarterly relative outperformance versus SPX appears to resuming.  These conditions present a low-risk buy opportunity in FRC that will remain valid above underlying support at 129.06 to 128.73.

Also note that FRC is in the Financial Sector, which our SEAF Model identified as one of the top two sectors of the S&P 500 in terms of asset inflows per Monday’s Keys To This Week report.

Chart 1

Table 1 below shows that considering the upside target of $155.00 and a protective stop placed below the $128,73 area, a long entry price of $134.96 would provide a 1:3.2 risk/reward ratio (risking $1.00 to make $3.20) with an initial risk of 4.6%.

Table 1

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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.