Bank stocks like Wells Fargo & Co (NYSE:WFC) bounced hard on Tuesday, March 28, after notable weakness over the past week-and-a-half. From both a chart perspective and a structural (interest rates and economic growth) perspective, WFC stock and many of its peers are offering much better buying opportunities again.
Much has been thrown at this stock market, not only last week, but also over recent years. While we have seen some setbacks from time to time as economic growth cooled, the uptick in growth over the past six months or so — both in the U.S., as well as Europe — truly does support higher stock market prices.
Add in the fact that many fund managers remain under-invested or “not bullish enough” for markets to peak, and you have a recipe that, despite high prices, still begs for more rallying.
At least for right now.
Before we look at the charts of WFC stock, I’d like to point out that Wells Fargo is scheduled to report its next batch of earnings on April 13, which isn’t that far away. So from a swing trading perspective, traders might want to lighten up on positions in the stock all the way up until (and through) the announcement.
Also, On March 22, I offered that shares of Bank of America Corp (NYSE:BAC) may soon be a buy again, and so far this week, the trade is working out nicely. When I last mused about WFC shares on Feb. 15, I said that based on a chart breakout that had just occurred, a next upside price target at $60 was in play. The price target was reached two weeks later.
WFC Stock Charts
On the multiyear weekly chart, we see that Wells Fargo shares remain in a clear uptrend from the 2009 lows, and that the recent highs in early March coincided with previous highs from the summer of 2015.
Double top, you ask? Not from where I’m standing.
At the bottom of the chart, note the marginal breakout of the 10-year U.S. Treasury Note yield past the diagonal resistance line. Through this lens, the 10-year yield looks to be on its way to break above 2.6% at some point this year. This should be wind at the back of bank stocks like WFC.
On the daily chart, we see that the recent 10% correction in WFC stock from early March highs down to the (thus far) late March lows has merely brought the stock back to the early January lows, as well as toward its rising 100-day simple moving average (blue).
Meanwhile, the RSI momentum oscillator at the bottom of the chart has worked its way to a much lower reading.
At the margin, these developments should make it easier for traders and active investors to get back into a stock that is now less “overbought.”
Over the past two trading days, WFC stock has begun working on a good-looking bullish reversal that could allow traders to get long the stock around the $55-$56 area. I see a next upside target at $58, followed by $60.
Swing trading stops could be placed near $54 on a daily closing basis.
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