Wells Fargo: Bank Shot

Ed Ponsi

Last week, the S&P 500 finally joined the Nasdaq in making new highs. This matters because the S&P 500 is a broad index, and includes some of the biggest names in pharmaceuticals, energy, communications, consumer staples, and banks. 

spvsndx

Speaking of banks, if you're looking for a sector to use as a hedge against long positions, there are some good candidates in the financials. 

XLF

Take the S&P Select Financial SPDR, symbol XLF. XLF is considered a bellwether for the banks. It's trading below its 200-day moving average, seen here in red, and is hovering just above its 50-day moving average, in blue. The ETF's Chalkin Money Flow indicator has just turned negative (red arrow). 

What about the individual stocks in the financial sector? On July 13th, I said the following about Wells Fargo (WFC) 

What was true then is even truer today. Since July 13th, the S&P 500 has gained 7.6%, but Wells Fargo has lost 6.9%. The stock has lost more than half its value this year. 

sp500vsWFC
S&P 500 (green) vs. Wells Fargo (blue). Chart by TradeStation

As if that wasn't bad enough, Wells Fargo's chart indicates that the stock could fall farther.

WFC

Wells Fargo is trading below its 50-day and 200-day moving averages, and has formed a large descending triangle, marked by the black dotted lines. Institutions are distributing the stock, according to the Chalkin Money Flow indicator (red arrow). 

The last remaining support for this stock is $22. If that level breaks, the next stop for Wells Fargo is the high teens. 

Is there a stock, commodity, or currency that you'd like to see analyzed? Feel free to leave a message in the comments section if you have a request.

Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.