WFC is the Best Financial Stock These Days

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Wells Fargo & Co (NYSE:WFC) has weathered the recent market pullback admirably and a breakout to new all-time highs looks inevitable.

Wells FargoWhat’s more, Wells Fargo stock boasts one of the best-looking charts in the financial sector, making it the best of breed from a technical perspective.

Here is the highlight reel from the big bank stock’s recent price action.

First, we have a clean ascending triangle pattern forming over the past quarter with higher pivot lows revealing increasing aggression from dip buyers and an easy-to-spot resistance zone at $56.

Second, we have a fresh breakout in the relative strength of WFC versus the broader financial sector — as measured by the Financial Select Sector SPDR Fund (NYSEARCA:XLF). Last week’s strong showing from Wells Fargo stock’s drove its relative strength to a new seven-month high.

Third, recent volume patterns in WFC look bullish. The volume during Thursday’s pop in Wells Fargo stock was massive, scoring a strong accumulation day for the stock.

Moreover, while the broader market suffered some pretty heavy high volume down days during the recent swoon, the volume amid down days in WFC remained muted.

WFC stock

Source: Stockcharts.com

Two Option Plays for Wells Fargo Stock

Traders looking to bank some profits on the coming breakout in WFC can limit their liability while upping the leverage by using options. Here are two top plays to consider — one aggressive and one conservative.

Buy the May $52.50 call for $3.55. The risk is limited to the initial $3.55 paid while the reward is unlimited. Since the call sits a little deeper in the money and only has 50 cents of time value, the effects of time decay over the next two months should be somewhat minimal.

Traders looking for a more conservative approach could buy the May $55/$57.50 call spread for $1.17 instead. The maximum risk is limited to the initial $1.17 paid and will be lost if WFC stock sits below $55 at expiration. The maximum reward is limited to the distance between strikes minus the net debit, or $1.33, and will be captured if Wells Fargo stock can rise above $57.50.

At the time of this writing, Tyler Craig had no positions on any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/wfc-best-financial-stock-days/.

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