Friday, July 12, 2013

WFC Wells Fargo Weekly and Daily Charts Earnings Imminent

WFC has the largest mortgage portfolio of the major banks so it has enjoyed a nice 2-year run higher.  WFC is a favorite son of Warren Buffett so that helps the stock receive an ongoing bid.  With the Treasury yields rising, and mortgage rates rising, the housing sector will slow. Initially, all those sitting on the fence about buying a house rush in when rates pop higher thinking the low point for rates is here and it is now or never. This took place over the last couple months. As rates rise, buyers have to factor in the higher mortgage payments on tap each month. Note the sideways behavior in May-June as many traders exit WFC as yields rise. The upward-sloping channel remains in play for the charts. Price tagged the top channel rails of both the weekly and daily charts three days ago. The daily chart shows the negative divergence spank down that creates the last three days of selling. The short green lines for the indicators show some long and strong VST momo still in play so a bounce may occur but it should lead to further weakness. Note the stronger volume over the last 3 weeks as the analysts and pundits have been pumping banks on television, on the Internet and in print media. These folks have enjoyed the ride up and need bag holders and sucka's so pump and dump is the preferred method. The large volume is distribution.

The weekly chart shows a rising wedge with the thicker red lines and price keeps stalling at the upper trend line. The indicaotrs are overbot and the negative divergence appears across the board. Money flow wants to see a recover move higher but it should roll over and the multi-month negative divergence will remain in place. WFC earnings are on tap in three hours time (8 AM EST). WFC and JPM earnings will set the tone for markets this morning. It is always tricky to forecast the immediate move. The banks in general should report strong earnings this quarter so weaker earnings will send shock waves if that occurs. WFC is consistent with a stock topping and rolling over to the downside. Independent of the move today, the move for the days and weeks ahead is lower. The daily chart shows a couple of projections in the margin, either down on the news to test the lower channel rail at 40.80 then lower to 40, or, a pop to play at 42-43 again, for a few days, then roll over to the downside again. Downside targets over the coming weeks include 40, 38 and 36. The 40 level serves as a neckline for a developing H&S pattern. A bounce after earnings would create attractive short opportunities. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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