Wells Fargo, $WFC, made a top in August and started to move lower. It paused into the end of September and consolidated under its 200 day SMA for 2 months. That was followed by another drop, this time steeper, deeper and faster, to a low Christmas Eve. Since then though it has been moving higher. It got back over its 20 day SMA last week and consolidated after a better than 11% bounce.
As it consolidates the Bollinger Bands® are tightening, often a precursor to a move. It also has a RSI pausing at the mid line with the MACD rising but not yet positive. All are promising for a secondary move higher, but never a certainty. There is resistance at 48.10 and 50.20 then 51 and 52 before 53 and 55. Support lower comes at 47 and 45.60 before 43.60. Short interest is low under 1%. The company reports earnings Tuesday before the open. The stock pays a 3.59% dividend, and went ex-dividend on November 8th.
A look at the options for January shows the 45, 50 and 52.50 strikes with large open interest on the put side and the largest at 52.50 on the call side. February options build open interest from 42.50 to 50 on the put side and are biggest at 47.50 on the call side and tail higher. March options show a clear bias higher with open interest on the call side 8 times as large as the put side and almost all above the current price, from 47.50 to 55.
Wells Fargo, Ticker: $WFC
Trade Idea 1: Buy the stock on a move over 48.10 with a stop at 47.
Trade Idea 2: Buy the stock on a move over 48.10 and add a January 47/45.50 Put Spread (42 cents) while selling a January 50 Call (23 cents) to pay for half of the cost.
Trade Idea 3: Buy the January/February 50 Call Calendar (40 cents) and sell the January 45 Put for 20 cents.
Trade Idea 4: Buy the January 48/50 Call Spread (75 cents) and sell the January 45 Put (20 cents).
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which as the first full week of 2019 concluded sees equities posting a positive follow up to last week with some digestion at the end of the week. Good news but still shy of a confirmed reversal higher.
Elsewhere look for Gold to possibly pause in its uptrend while Crude Oil moves higher with some digestion short term. The US Dollar Index looks to drift lower in broad consolidation while US Treasuries pull back in their uptrend. The Shanghai Composite looks to continue the downtrend with Emerging Markets possibly putting in a bottom and reversal.
Volatility looks to settling back to normal levels clearing the way for equities to show if they have strength. Their charts show the equity index ETF’s SPY, IWM and QQQ, continuing the bounce higher and consolidating the move at the end of the week. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.