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Wells Fargo & Co (WFC) Stock Is Ripe for a Renewed Rally

Look closely: WFC stock is waving that bullish flag

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Wells Fargo & Co (NYSE:WFC) has been mired in its ginned-up-accounts scandal for many months now, but a broader banking tailwind has me considering WFC stock as a potential breakout candidate.

Beat the Bell: Wells Fargo & Co (WFC)Banking stocks received a little boost Wednesday, May 3, on the back of a moderately hawkish statement from the Federal Reserve following the Federal Open Market Committee meeting. We also saw the U.S. dollar and interest rates bump a little higher on the day.

All of this was a fairly classic reaction to the type of statement we received, which did not back off its tone despite a little economic weakness of late.

On FOMC days — or other major economic data days such as jobs reports — I always keep a particularly close eye on interest-rate-sensitive stocks and sectors, in particular the financial sector and banking stocks. While I generally watch a broader basket of financial stocks such as the Financial Select Sector SPDR Fund (NYSEARCA:XLF), I do also have some go-to stocks in the space — one of them being Wells Fargo.

WFC stock behaves well through the lens of chart analysis, and doesn’t offer many erratic moves while still offering enough volatility to make it worth playing.

This makes Wells Fargo a good “swing trading” stock.

When I last mused about Wells Fargo stock on March 29, I pointed to the stock’s constructive bigger picture, particularly given the marginally rising interest rates. In specific, I offered that a trade to the upside against the $54 level (stop-loss) could make sense toward $58. As it goes in trading, not all trades work out, and this trade stopped out at $54 a few days later.

Importantly, however, we had well-defined risk in the trade. As such, a real meaningful loss was averted by having a clear trading plan.

As I often say to my clubhouse members: Plan the trade, and trade the plan.

WFC stock chart weekly view
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Revisiting the multiyear weekly chart reveals that despite a deeper drop than I had anticipated in March and April, WFC shares largely are constructively positioned for another move higher.

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