The holding company for First-Citizens Bank & Trust Company that provides banking services to retail and commercial customers, First Citizens BancShares, Inc. (Nasdaq: FCNCA) seems to be poised for a decline in its price in the near term as per its latest charts.
Bearish Indications
[hana-code-insert name=’adsense-article’ /]#1 Head and Shoulders Pattern Breakdown: The daily chart shows that the stock has broken down from a head and shoulders (H&S) pattern.
This pattern is marked in orange color in the daily chart.
A head and shoulders pattern is a bearish pattern and a breakdown from it usually indicates that the stock may move lower.
The daily chart shows that the stock had declined after breakdown from the H&S pattern.
Currently, the price is near the breakdown level of the H&S pattern with a long upper-tailed candle. This indicates possible weakness.
Daily Chart – FCNCA
#2 Price below MAs: The price is currently below both 50-day as well as 200-day SMA in the daily chart, indicating bearishness.
#3 Bearish Stochastic: The stochastic in the daily chart shows that the %K line is below the %D line. This is also a possible bearish sign.
#4 Broken Uptrend: The weekly chart of FCNCA shows that the stock had recently broken down from an uptrend. This uptrend line is marked in purple color in the weekly chart below. A breakdown from an uptrend usually indicates weakness. The stock is also trading below its 50-week SMA, indicating that the bears are slowly gaining control.
Weekly Chart – FCNCA
#5 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color) in the weekly chart. This typically indicates possible bearishness.
#6 Near resistance level: The stock is currently trading near a long-term resistance level. This level is marked as a pink color dotted line. FCNCA had taken support at this level multiple times during the past several months, before finally breaking down from that level on the week ending 10th December, 2018. Such a support level would typically start to act as a strong resistance level. So, this seems like a good area for the stock to correct.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for FCNCA is below $400.
TP: Our target prices are $380 and $360 in the next 4-6 months.
SL: To limit risk, place a stop loss at around $407. Note that this stop loss is on a closing basis.
Our target potential downside is almost 5% to 10% in the next 4-6 months. For a risk of $7, our target rewards are $20 and $40. This is a nearly 1:3 and 1:6 risk-reward trade.
In other words, this trade offers nearly 3x to 6x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it continues to move above the breakdown level of H&S pattern. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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