Can This Brokerage Trade Above Its 52-Week High?

Shares of discount brokerage E*TRADE (NASDAQ: ETFC  ) reached a 52-week high on Monday. Let's take a look at how it got here to find out if the company's stock price can grow even higher.

How it got here
Like that old Saturday Night Live gag commercial for First CityWide Change Bank ("We just make change!"), the core reason why is simple: volume. E*TRADE's trading has picked up lately, with its DARTs (daily average revenue trades, the key metric for the segment) coming in at just under 163,000 for the month of May, a robust 15% increase over the April figure. This was quite a pleasant surprise considering that the previous month-over-month rise was a mere 1%.

It seems that May performance was good enough to erase some concern over the company's most recently reported quarter, which saw it miss top-line estimates and graze EPS projections. After the May DARTs were released in mid-June, the stock eventually climbed from a little over $12 to the nearly $13.50 it reached on Monday.

That's not only good enough to take the one-year high crown, it's the loftiest the stock's traded at since the summer of 2011.

Bellying up to the bar
E*TRADE isn't the only one enjoying the party. Its rivals have come in through the front door and are currently enjoying the cocktails and snacks as well. TD AMERITRADE's (NYSE: AMTD  ) DARTs rang in at around 417,000 in May, a 9% increase over April's 383,000, which in turn bettered the March number (361,000) by 6%. Like E*TRADE, the company's stock is also floating above its multi-year high.

Ditto for the Dean of the Discounters, Charles Schwab (NYSE: SCHW  ) . Chuck's stock just crossed the $22 mark; this is a bonanza for those hardy investors who piled in in late 2011, when the shares were trading at less than half that price. Schwab has a more multi-faceted operation than its two brethren, but it swims in the same market as they do, so trading matters. Good thing, too, as its May DARTs saw a TD AMERITRADE-ish rise of 8% on a month-over-month basis to 505,400.

That month's DARTs for all three companies were some of their best in quite some time. Over the past year, Schwab's number for May was eclipsed only by this past February's 506,100. TD AMERITRADE, meanwhile, notched a one-year record with its 417,000.E*TRADE's no slouch in this area, either -- you'd have to go back to February 2012 to find a higher DART figure than that most recent tally of almost 163,000.

The party's a good one, and the host is leading by example. Consolidated volume reported by NYSE Euronext (NYSE: NYX  ) jumped in May (77.6 billion shares) and April (77.1 billion) compared to the two previous months (69.3 billion in March, 69.7 billion in February).

What's next
Faith in E*TRADE stock largely depends on an investor's view of the market. If that outlook is strongly bullish or bearish, it follows that the anticipation would be for the recent market volumes to continue to be relatively high -- greed and panic both put a lot of juice into trading activity. And the higher the volume, the higher E*TRADE's fees, and the happier its investors.

But of course, it's not the only discounter out there, and it's not the only one having a ball. It should be kept in mind that, compared to its rivals, E*TRADE has had more than its share of loss-making quarters and years. And unlike those competitors, its trailing 12-month EPS is still firmly in the red at $0.49 per share. That compares most unfavorably to the positive numbers of TD AMERITRADE ($1.07) and Chuck S. ($0.69).

Meanwhile, E*TRADE is scheduled to report its Q2 earnings next week, and it should also release its June DARTs around that time. If, like the Q1 numbers, earnings aren't too disastrous, and DARTs remain high, the stock has a good chance of continuing its momentum. After all, the market, for now, seems to be in a mood to continue the party.