Wells Fargo, symbol WFC on the New York Stock Exchange, is scheduled to report second quarter earnings on Tuesday, July 14 before the market opens.
Analysts estimate that Well Fargo lost 11 cents per share during the quarter, on revenue of 18.61 billion.
Before we take a deeper dive into Wells Fargo, I'd like to provide some context by charting the entire banking sector. This is the current daily chart of the SPDR Bank ETF, symbol KBE, which is considered a bellwether for the U.S. banking sector.
As we can see, it's been a less-than ideal environment for banks. Low interest rates are cutting into bank profits, and the fear of defaults on business loans and consumer loans weight heavily on this sector.
Now take a look at Wells Fargo, below in red, vs. the S&P 500 in green. Both WFC and the index suffered heavy losses as the COVID-19 pandemic crushed stocks. Notice how the S&P 500 has regained nearly all of its losses, while Wells Fargo hasn't bounced back at all.
Now let's go to the chart of Wells Fargo itself. The stock closed the week in style on Friday, July 10, by jumping nearly 6%, Wells Fargo is still trading beneath its 50 day moving average, in blue, as well as its 200 day moving average, in red.
The bottom line: even though the overall market has been strong since late March, this stock has failed to participate in a massive rally. It's one of the weakest stocks within one of the weakest sectors of the market.
When I see a stock that's a beaten up as Wells Fargo is right now, I know some people will buy it on the assumption that a stock that's down has more room to rise. That might work out, but on the other hand, technical analysts believe that when a chart is down this much, there's usually a good reason for that.
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