Wells Fargo & Co (NYSE: WFC) seems to be poised for a price surge as per its latest charts. Wells Fargo & Company is an American multinational financial services company with corporate headquarters in San Francisco, California.
The stock was also a part of our recent watchlist.
Bullish Indications
#1 Trend Channel Breakout: As you can see from the daily chart, the stock was trading within a channel during the past few months. This is marked in the chart in pink color. Currently, the stock has broken out of the uptrend channel and has moved higher. Once the stock breaks out from a channel, it has the potential to move further up.
WFC – Daily Chart
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This is a possible bullish sign.
#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#4 Bullish MACD: The MACD (light blue color) is currently above the MACD signal line (orange color), indicating possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and the ADX line has started to move up from below both (+DI) and (-DI).
#6 Flag Breakout: As you can see from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart in purple color. Currently, the stock has broken out of the flag. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case).
WFC – Weekly Chart
#7 MACD above Signal Line: The weekly chart also shows that the MACD (light blue color) is currently above the MACD signal line (orange color). This typically indicates a bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for WFC is above the near-term resistance level of $54.60. However, you can purchase half the intended quantity of shares of WFC above yesterday’s close, at around $52.40.
TP: Our target prices are $59 and $64 in the next 4-6 months.
SL: To limit risk, place stop-loss at $52 (for entry near $54.60) and $48.10 (for entry near $52.40). Note that the stop-loss is on a closing basis.
Our target potential upside is 8% to 22% in the next 4 to 6 months.
- Entry near $54.60: For a risk of $2.60, our target rewards are $4.40 and $9.40. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $52.40: For a risk of $4.30, our target rewards are $6.60 and $11.60. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the trend channel breakout level with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
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