Additional Trading Ideas:
In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:
PLCE, SUNE, GIL, MBLY, ATHM, AAN, DNKN, MNRO, USCR
NEW BULLISH Plays
PacWest Bancorp - PACW - close: 48.30 change: +0.80
Stop Loss: 46.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 23, 2015
Time Frame: Exit prior to earnings in late July
Average Daily Volume = 771 thousand
New Positions: Yes, see below
There has been a lot of expectations for the financial stocks to outperform once the Federal Reserve starts raising rates. While the actual date of the Fed's first rate hike since 2006 is still not clear yet it's widely believed that higher rates are coming. If not this year then early next year.
Robert Albertson, at Sandler O'Neill, was recently quoted by CNBC. Albertson said, "if the Fed funds rate goes to 0.6 percent by the end of this year, and 1.7 percent by the end of next year, which is pretty much what the Fed is projecting, you could get a 20 to 30 percent increase in the bottom line of many banks."
The XLF financial ETF is trading at multi-year highs but it's only up +1.7% this year. Meanwhile the smaller regional bank ETF, the KRE, is outperforming with a +11.4% gain year to date. PACW is a regional bank and so far it's only up +6.2% but there is a good chance it could play catch up with its peers.
According to the company, "PacWest Bancorp (PacWest) is a bank holding company with over $16 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (Pacific Western). Through 80 full-service branches located throughout the state of California, Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, to small and medium-sized businesses. Pacific Western and its CapitalSource Division deliver the full spectrum of financing solutions nationwide across numerous industries and property types."
PACW is actively growing through acquisitions. In the last fifteen years they have made 27 acquisitions and are currently digesting another one (Square 1 Bank, SQBK).
Net interest margin (NIM) is a key component to a bank's profitability. The five largest U.S. banks (U.S. Bancorp, Wells Fargo, Citigroup, Bank of America, and JPMorgan) have been struggling to build their NIM. According to Forbes, the weighted average for the five banks for fiscal year 2014 was 2.5% while Q4 2014 was 2.55%. That's down from a 2.8% average in 2012.
PACW's most recent quarterly results reported their NIM above 5.0%.
Technically shares of PACW have been showing relative strength the last few weeks and just broke out past major resistance at $48.00 today. The point & figure chart is very bullish and forecasting a long-term target at $64.00. Today's breakout could signal the next leg higher.
We are suggesting a trigger to open bullish positions at $48.55.
Trigger @ $48.55
- Suggested Positions -
Buy PACW stock @ $48.55
- (or for more adventurous traders, try this option) -
Buy the SEP $50 CALL (PACW150918C50) current ask $1.20
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike