E*Trade Financial Corporation (ETFC) shares have been trending lower over the past month after reaching 52-week highs. Many analysts remain bullish on the stock given the rising interest rate environment that boosts net interest margins along with a $1 billion buyback program that could provide some support to the stock price over time. However, the acquisition of Trust Company of America has added some uncertainty to the equation.
During the third quarter, the E*Trade reported revenue that rose 23.3% to $599 million – in line with consensus estimates – while net income of 55 cents per share beat consensus estimates by four cents per share. The company acquired Trust Company of America for $275 million in cash, which brings about $17 billion in institutional assets and more than 180 active registered investment advisors on its platform.
From a technical standpoint, the stock briefly hit a 52-week high earlier this month, but the day turned out to be a bearish engulfing. The stock subsequently slid from a high of nearly $46.00 to current levels of around $43.29. The relative strength index (RSI) appears neutral at 50.78, but the moving average convergence divergence (MACD) remains in a significant bearish downtrend that forecasts more downside ahead.
Traders should watch for a rebound from key support levels at around $42.20, where its pivot point, 50-day moving average and lower trendline support converge. A rebound from these levels could lead to a move toward the upper end of its price channel near R2 resistance at $46.54, while a breakdown from these support levels could lead to a move down to S1 support at $40.74 or S2 support and the 200-day moving average near $38.00.
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.