Wells Fargo & Co (WFC) with a current market cap of just under USD $236 Billion was the largest US bank until recently, as the bank has been on a volatile ride the last 2 weeks. Falling from a closing price of $50.80 a share on the 31st August to yesterday's close of $46.96 or a 7.5% decline in market value .
The reason for the decline is the news that bank's employees who were pressured to meet high sales targets, had been opening new bank accounts, credit cards and other bank products. Up to 2 million banking products in total were opened over the last several years without the permission of their clients. As a direct result the bank has been under scrutiny from US regulators, together with approximately 5000 employees directly involved fired over the scandal.
Wells Fargo Chart Review
Below I have added Wells Fargo monthly chart, where you can see that the bank had enjoyed several years of solid share price gains as the bank climbed from around $23/24 a share back in September 2011, to high of $58.76 last year in July.
After breaking its uptrend in January this year (see black circle), it formed a new support level of $46.90 and has been gong sideways, bouncing between $50.80 and $46.90 the last 7 months.
Where Is Wells Fargo Headed Next?
Yesterday close of $46.96 is just above its monthly chart support level. If Wells Fargo were to close below this level by the end of September, the new level support would be at around the $41.00 level or 12.7% lower than its 13th Sept closing price.
Taking a closer look with the daily chart below, if Wells Fargo were to fall below the current price level you can see that the next support level is much closer than the monthly chart at $44.50. The $44.50 level is significant as the share price made an intraday low on 2 occasions at that exact price before heading higher. Its quite possible that if it reaches the $44.50 support level that it also bounce off that price to form a triple bottom further strengthening that support level.
Final Conclusion - Bearish
Wells Fargo & CO has been consolidating with a sideways pattern since January this year, with the chart showing several bearish indicators. These include the current price is trading below both the 50 and 100 day moving averages, as well as the moving averages just completing a bearish crossover.
Because of the bearish sentiment towards the stock with the banking products scandal, as well as bearish technical indicators the bank will find it difficult staying above the $46.90 support level over the next few weeks.
Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
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I am a private trader and equities investor that loves the trading and investing world, following the markets and everything in between.