Yesterday’s Federal Open Market Committee announcement set the stage for higher rates sooner rather than later. The news will help feed some technical trades in the banking industry on stocks like PNC Financial Services Group Inc (NYSE:PNC), but there’s a larger bank on our technical target list as a rebound in Wells Fargo & Co (NYSE:WFC) appears to be brewing.
Finally, our technical scan picked up a familiar name from last month that provided a great technical trade then that appears to be liningup again in shares of MeetMe Inc (NASDAQ:MEET)
Wells Fargo & Co (WFC)
The debacle that has emerged within the confines of Wells Fargo took the shares down by more than 12%. Believe it or not, things aren’t over, as various states are lining up their investigators to start looking at the books. While not good for the fundamentals, there’s still a technical trade brewing.
WFC shares shot to their $45 level last week on the initial news, put in a relief rally and are now headed back to $45. This is rounding out to be the make-or-break point for Wells Fargo stock.
The $45 mark has been the bottom of a wide trading range for WFC for all of 2016. While Wells Fargo stock has been a laggard in the group, it is still being defended heavily with volume at $45. This time around, WFC stock is oversold at the same time that we’re seeing Wells Fargo shares hit that $45 level point.
In addition, WFC is still unbelievably within the range of its Bollinger Bands, meaning that the recent price moves are within a “normal” distribution for the stock recently … not that the pullback is “normal,” but from a technical perspective it is.
Shares should find support at the $45 level and offer traders a chance to make a quick profit on a run to the $49 mark based on resistance. This is not a long-term hold according to the charts and the news cycle, so don’t fall in love with Wells Fargo just yet.
PNC Financial Services Group Inc (PNC)
Yesterday’s FOMC meeting provided the regional banks with exactly what they needed, a clear sign of where rates are headed. This group of stocks benefits from rising rates, since they make revenue from their balance sheets, not investment banking and other means. This means that higher rates will expand revenue for companies like PNC.
The chart for PNC is a breakout waiting to happen as we’ve seen a rally to the top of its range and then a strong holding pattern at $90. The stock looks like a jittery horse ready to explode out of the gate at Churchill Downs and yesterday’s FOMC decision may be the bell.
The chart supports a breakout for four reasons:
- A recent (three days ago) Golden Cross pattern in the shares. This suggests an intermediate-term bullish trend is emerging.
- The recent consolidation has allowed the RSI for PNC Financial to wander into the middle of its range. This means the stock is not overbought while trading at the top of its range.
- The momentum indicator for PNC stock remains at its strongest level for 2016.
- The breakout will take PCN stock to a new range of high prices for 2016.
These four points indicate that the break above $91 will get the technical buyers rushing into PNC Financial Services shares as buyers, as the company will set itself as a relative strength leader within the sector.
MeetMe Inc (MEET)
We covered MeetMe last month after the stock sold off on positive earnings. At the time, we covered it as a buy for the technical bounce from $5 — a good move with the shares trading at $5.82. Now, the chart suggests another step higher is on the horizon.
MEET recently pulled back from $6.25 after hitting a short-term overbought trigger. Traders took profits and the shares slumped to $5.11 before technical buyers came back in to prop shares higher.
The swing took our oscillators back to oversold and indicated another short-term buying opportunity that is currently in place. At the same time, our momentum indicator is now moving into positive territory.
The interesting thing is that MEET stock tends to run higher ahead of earnings, which are still more than a month away. We’re anticipating another similar run, which is why the most recent oversold signal interests us.
The next step higher may take out the 50-day moving average ($6.18) with some momentum behind the shares. This means that the momentum traders and those that will trigger a buy off the sound break of the 50-day trend, will turn to buyers potentially starting the “buy the rumor” trade ahead of earnings.
Following the charts, MEET stock has turned bullish again with a significantly higher price target.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
