Wells Fargo & Co (NYSE:WFC) — Shares of WFC stock have rallied over the past week, as the chances of an interest rate hike before year end have increased. Federal Reserve Chair Janet Yellen said in her speech at Jackson Hole, Wyoming, on Friday that the case for another increase this year had “strengthened,” which is a positive for the financial sector.
Wells Fargo is the fourth largest U.S. bank by global assets of $1.9 trillion and the largest U.S. lender.
According to Capital IQ Equity Research, even if the Fed continues to delay an interest rate increase, Wells Fargo’s net income is projected to increase 2.1% in 2016 and 2.7% in 2017. But this could improve depending on the Fed’s timeline for interest rate hikes. Furthermore, due to the acquisition of GE Capital, loans held for investment are estimated to jump 6.8% this year, up from a strong 6.3% a year ago, which is above the peer average.
Turning to the chart, we see that WFC stock rallied Monday on high volume, closing more than a point above its bearish resistance line and almost 1 full point above its 200-day moving average. Higher-than-average volume for three days supported the breakout. And the internal MACD indicator also flashed a strong buy signal.
A double-bottom at $44.50 in February and June preceded what evolved into a breakout pattern. August’s successful attack on the 50-day and 200-day moving averages, and the close above the stock’s bearish resistance line, render a trading target of $58.
Traders should look to buy WFC stock at $50 with a target of $58 for a potential return of 16%. WFC stock is also appropriate for investors seeking income and growth in one of the world’s premier banking systems. Wells Fargo pays a quarterly dividend of 38 cents per share, for a current forward annual yield of 3.1%, and its next ex-dividend date is expected in early November.
