FFBC Stock Stands to Benefit in a Rising Rate Environment
The markets have been under pressure in 2018, which has resulted in an elevated level of volatility. The wild swings that the markets have been experiencing are a direct result of these elevated levels of volatility.
Unfortunately, this characteristic is conducive to markets being geared toward lower prices because the culprit behind these unfolding events is higher interest rates.
The Federal Reserve has made it pretty clear that it intends to continue its interest rate hike cycle. So, instead of worrying, why not focus on a sector that stands to benefit from higher interest rates, like the banking sector?
Banks make money on loans, and a rising interest rate environment implies that these banks are going to make larger margins on these loans. So it should not be surprising that the banking sector has been holding up especially well in these volatile markets.
I am focusing on First Financial Bancorp (NASDAQ:FFBC) stock because it stands to benefit from a higher interest rate environment.
But more importantly, there are a number of technical developments that have just been created on the First Financial Bancorp stock chart, suggesting that higher FFBC stock prices are on the horizon.
The first development that caught my eye was a completed technical price pattern, which is highlighted on the following First Financial Bancorp stock chart.
Chart courtesy of StockCharts.com
The completed technical price pattern highlighted on the FFBC stock chart is a flat-top diamond pattern.
Diamond patterns are a combination of two triangle price patterns; the first triangle is expanding while the second one is contracting.
These patterns are identified using trend lines. The lower trend lines represent price support, and they were created by connecting the series of lower lows and the subsequent series of higher lows. The upper trend line representing resistance was created by connecting the series of higher highs.
As this technical price pattern develops, the range between support and resistance first begins to expand. Then, midway through the pattern, the levels of support and resistance begin to contract.
In essence, this pattern creates an awkward and frustrating trading range where the stock price cannot sustain a move in either direction.
On April 20, FFBC stock broke above resistance, implying that the stock is no longer bound by the awkward trading range.
This breakout completed the flat-top diamond pattern, suggesting that further gains are likely to follow because headway has finally been made.
This notion of higher stock prices suggested by the completed price pattern is magnified when it is combined with the price action that preceded it.
This combination of price action creates a wave structure, which is highlighted on the following First Financial Bancorp stock chart.
Chart courtesy of StockCharts.com
This FFBC stock chart illustrates a constructive wave structure consisting of an impulse wave (green) and a consolidation wave (purple). These waves are responsible for creating and sustaining a bullish trend.
Impulse waves are advancing in nature. As a result, they capture the stage in a bullish trend when a stock makes a sustained move toward higher stock prices.
Consolidation waves are corrective in nature. As a result, they capture the stage in a bullish trend when a stock price corrects and refrains from advancing.
The corrective price action that produces the consolidation wave is necessary to create the conditions for a new advancing impulse wave to follow.
The flat-top diamond pattern can also be classified as a consolidation wave, and its completion implies that an advancing impulse wave is now in development. Therefore, a sustained advance is expected to follow.
This notion of higher prices is being reinforced by the moving average convergence/divergence (MACD) indicator, which has the propensity to correctly confirm which wave is currently in development.
MACD is a trend-following momentum indicator that determines whether bullish or bearish momentum is influencing the price action in a stock.
Bullish momentum implies that a stock is likely to appreciate, while bearish momentum implies that a stock is likely to depreciate.
Momentum is a very powerful force because First Financial Bancorp stock has not been able to sustain a move in either direction unless the applicable level of momentum has been supporting it.
Bullish MACD signals have accompanied impulse waves, while bearish MACD signals have accompanied consolidation waves.
The completion of the consolidation wave has coincided with a bullish MACD cross, and these indications reinforce the notion that FFBC stock is now likely to sustain a move toward higher prices.
A number of technical developments on the First Financial Bancorp stock chart are suggesting that the stock is primed to make a sustained move toward higher prices.
This bullish view is predicated on the notion that the FFBC stock price maintains its footing above the level of price resistance that defined the flat-top diamond pattern.