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 higher high in February but with a momentum divergence that proved to be the top for the stock. It confirmed a double top with a drive down through the 200 day SMA that found support in March. A weak bounce followed and then reversed to a lower low and support near the 61.8% retracement of the full post pandemic move higher in June. It moved higher, to test the June high, in August and has drifted lower since. Friday ended with a bearish engulfing candle boding for more downside.

The RSI is dropping towards the bottom of the bullish zone with the MACD crossed down and about to turn negative. There is support lower at 42.50 and 41.25 then 40.25 and 38.50 before 37.50. Resistance higher sits at 44.50 and 45.50 then 46.25 and 47.50 before 49.25. Short interest is low under 1%. The stock pays a dividend with an annual yield of 2.77% and has been trading ex-dividend since August 4th. The company is expected to report earnings next on October 14th.

The September options chain has biggest open interest at the 45 put and call strikes. The October 14 Expiry has only recently started trading. The October monthly options show open interest focused at the 45 and 42.50 put strikes and the 45 and 50 calls. In the November chain the open interest is spread from 45 to 40 on the put side and bigger and spread from 45 to 50 on the call side.

Wells Fargo, Ticker: $WFC

Trade Idea 1: Sell the stock short on a move under 42.50 with a stop at 44.50.

Trade Idea 2: Sell the stock short on a move under 42.50 and add a October 14 Expiry 44/47 Call Spread ($1.25) while selling the November 37.50 Put (90 cents).

Trade Idea 3: Buy the September 42/October 37.50 Put Diagonal (5 cents).

Trade Idea 4: Buy the October 14 Expiry 42/39/37 Broken Wing Put Butterfly (65 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 with August in the books, and the unofficial end of summer upon us, saw equity markets resumed their losing ways.

Elsewhere look for Gold to continue its pullback while Crude Oil continues to move lower as well. The US Dollar Index continues to drive to the upside while US Treasuries pullback in their downtrend. The Shanghai Composite looks to continue the short term move lower while Emerging Markets remain in a downtrend.

The Volatility Index continues to creep higher making the path easier for equity markets to the downside. Their charts look weak on both timeframes as price approaches the June lows. On the shorter timeframe both the QQQ and SPY have now given up about 61.8% of the bounce from the June low, while the IWM is holding a little stronger at only about a 50% retracement. 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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