Shares of Wells Fargo (WFC) - Get Report appear to be returning to rally mode on Wednesday. The stock has been well bid from the opening bell, an impressive move that has pushed it to fresh January highs.
Wells Fargo is now up more than 5.75% from last week's low and is leaving behind a very solid base. For patient investors a more positive view of the action seems logical in the near term.
In early November, Wells Fargo left behind a major support zone as the post-election rally got underway. The initial surge lifted shares over 15% higher before running out of steam near the January high. Wells Fargo consolidated for two weeks before taking off again on Dec. 1. This new leg pushed the stock another 10% higher and well into overbought territory.
Immediately after reaching $58 on Dec. 8, the stock began to pull back. This healthy action allowed Wells Fargo to work off its overbought reading while retesting key support near the $54 area.
Wells Fargo's basing action above support has put the stock on solid ground. Investors should view shares as a buy on weakness. Nearby support is now in place between $56.35 and $55.
On the downside, a close back below $53 would do considerable damage and would lead to more consolidation. On the upside, a logical initial target is the 2016 spike high near $58.
This article is commentary by an independent contributor. At the time of publication, the author was long Wells Fargo.