Investors wasted no time hitting the sell button after Massachusetts Senator Elizabeth Warren eviscerated Wells Fargo & Co. (NYSE:WFC) CEO John Stumpf during a Senate Banking Committee hearing on Tuesday. Volume quickly ramped up as traders rushed to dump Wells Fargo stock, bringing it well below resistance at its 50-day moving average of $48.28.
Now that WFC stock is looking quite oversold, some are wondering if this is a rare buying opportunity.
I don’t think so. In fact, a massive scandal that’s now costing the company $185 million in fines is enough to keep me away from Wells Fargo stock for the foreseeable future.
Most solid companies are able to bounce back from scandals after a settlement is reached and investors start to focus on the actual future of the business model. WFC is likely no exception, but the problem here is that the timing is very difficult to determine.
In complex situations like these, there is often another shoe just waiting to drop, which is why I don’t think the selling has ended for WFC stock just yet. It’s a smarter move to wait until the company is out of the news cycle, even if it means you have to pay a little more to buy in.
Plus, there are too many other good opportunities in the banking sector right now to stay focused on a stock that is currently broken.
WFC is underperforming even from a technical perspective, slumping to a new multi-month low last week.
The only silver lining is that WFC stock is holding above a triple bottom around $44.50. If shares can hold above that level it may instill some confidence in investors — but a close below $44.50, and I expect we’ll see another big leg lower.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.
