PNC Financial Services (PNC), the second-largest U.S. regional bank, announced first-quarter results yesterday that helped spark a small fire under PNC stock.
PNC earnings came to $1.82 per share, up 3% year-over-year and ahead of analyst estimates by 16 cents. However, revenues of $3.78 billion were down 5% YOY and shy of expectations of $3.84 billion.
Like many banks, PNC continues to cut jobs and consolidate parts of the company in order to further reduce costs, which would explain the rising EPS amid a declining top line.
Financials have been something of a mixed bag in terms of their performance as of late, though most have dropped during the past couple weeks. For the more nimble investor and trader, this means scouring the landscape for financials showing relative strength that could offer nice and defined opportunities on the long side … say, PNC stock.
Following the earnings announcement, PNC stock improved by 2.7%, which helped shares make up a good part of their weakness from early April highs.
PNC Stock Charts
Let’s look at the bigger picture in the below multiyear weekly chart. Over the past few weeks, PNC stock reached a major resistance level dating back to the September 2008 highs. PNC, relative to its 2008 highs, has performed much better than many financials — a good number of which still remain trading well below their 2008 highs.
Importantly, PNC stock developed a significantly bullish consolidation pattern from April 2010 until April 2013, which on the below chart is marked with the three blue bubbles and in the world of technical analysis is referred to as an inverse head-and-shoulders pattern. In April 2013, PNC stock finally broke out of this pattern and released higher into the 2008 highs.
However, the inverse head-and-shoulders pattern has an ultimate upside price target closer to the $92 area — measured as the distance between the bottom of the pattern and the neckline, which is then added to the neckline — which has not yet been reached.
Last Friday, PNC stock bounced off its late 2012 uptrend (black line on the daily chart below), which coincides with the 100-day simple moving average (blue line). PNC then continued to move marginally higher, and Wednesday’s post-earnings rally further confirmed that last week’s low in the stock was an important one.
For active investors and traders, risk on the long side for PNC stock is thus currently very clearly defined with last week’s lows, while reward as per the longer-term chart above looks good toward $92 over the next month or two.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.