Wells Fargo: A Technical View

By L.A. Little of tatoday.com. With all the fuss being made over Rochdale Securities analyst Dick Bove's downgrade of Wells Fargo(WFC) Wednesday afternoon and the subsequent selloff in the bank's shares, a look at the stock's technical situation seems in order.

Wells Fargo has more than tripled in price since the March lows. Those gains, along with the recovery of a few other heavyweight bank stocks, have been a driving force in the broader market's tremendous push higher from the March lows.

In case you missed what happened Wednesday, Wells Fargo reported earnings and initially traded higher on the news, moving to a little more than $31 per share. By the afternoon though, they were starting to slip. With less than an hour to go in the trading session, Bove dropped a bombshell.

Having initially commented that Wells' earnings looked OK, he made an about-face and cut his rating on the bank's shares to sell from neutral. They tanked and dragged the whole market down with them. Was the price drop justified? Will the stock continue lower or simply work even higher? What does the technical picture tell us?

When attempting to understand a stock's potential, it is always best to construct long-, intermediate- and short-term views. Depending on the time frame you are attempting to trade, the time interval examined will be different. In this analysis, I'll approach Wells Fargo from the point of view of a swing trader, someone who intends to hold it for weeks or months, not days.