4 Trade Ideas for Wells Fargo: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Wells Fargo, $WFC, made a low in March. Since then, it has struggled. The price has spiked a couple of times, in April and June, but could not hold. This has defined strong resistance, with the price spending most of the time at the bottom of the range, expanding to the downside. It trended lower for 5 months before mounting a strong move to the upside in November. That took it back to the top of the range and then it broke out higher. Despite a new higher high it failed to move up again and reversed.

From failed moves come fast moves, and it dropped back to the 50 day SMA, where it sits ahead of the new week. The RSI is falling and on the edge of a move into the bearish zone with the MACD dropping and about to turn negative. There is support lower at 29.75 and 28.50 then 27.25 and 26.25 before 25 and 23.65. Resistance higher sits at 31.25 and 34 then 35 and gaps to fill to 36.25 and 39. Short interest is low at 1.1%. The stock pays a dividend with an annual yield of 1.34% and begins trading ex-dividend on Thursday, February 4th. The company is expected to report earnings next on April 14th.

The February options chain shows strong open interest on the put side at the big strikes $2.50 from each other: 25, 27.50, 30, 32.50. On the call side it is similar but builds from 30 to 32.50 and then biggest at 35. The March chain is biggest at 27.50 and then tails up to 32.50 on the put side. The call side is enormous at 35. The April chain, covering the earnings event, shows biggest open interest at the 27.50 put and nearly 3 times large at the 30 strike call.

Wells Fargo, Ticker: $WFC

Trade Idea 1: Sell the stock short on a move under 29.50 with a stop at 31.50.

Trade Idea 2: Sell the stock short on a move under 29.50 and add a February 31.50 Call (59 cents).

Trade Idea 3: Buy the March 27.50/25 1×2 Put Spread (19 cents).

Trade Idea 4: Sell the March 25/35 Strangle (75 cents).

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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 after a Santa Claus Rally and the first 5 days of January going higher, failed to print the trifecta as the month of January ended lower.

Elsewhere look for Gold to continue its pullback while Crude Oil consolidates in the uptrend. The US Dollar Index consolidates in the downtrend while US Treasuries pause in their downtrend. The Shanghai Composite and Emerging Markets look to continue the pullbacks in their respective uptrends.

The Volatility Index is rising causing headwinds for the equity markets to the upside. Their charts remain strong on the longer timeframe but extended. On the shorter timeframe the SPY, the IWM and the QQQ are retrenching. There is no major damage yet, but the SPY leading to the downside might be the primary indicator next week. Use this information as you prepare for the coming week and trad’em well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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.

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