Buy Wells Fargo
Wells Fargo (WFC) - Get Report , along with the bulk of the banking sector, got a powerful boost Thursday from the successful stress tests. Wells Fargo opened the session with a huge upside gap, its biggest of the year, and then stabilized with a 3% gain on the session. This impressive breakout move has left behind layers of support setting the stock up well for more upside.
During the six weeks before Wells Fargo's post-earnings breakdown on April 13, the stock was already in a deep selloff. Despite the weak action that followed the last earnings news, further downside was limited as shares regained their footing near a major support zone. This key area, which marked multiple monthly highs as well as an upward sloping 200-day moving average, held again at the May and June lows. As this week's rally extends, a major bottom now appears to be in place near $52.00.
Looking ahead, investors should consider Wells Fargo a low-risk buy on weakness. There is now a very solid support zone nearby that includes the May peak ($55.60) at the upper band and the initial June highs at the lower band. Wells Fargo has plenty of room to run before entering overbought territory, so a run back up to major supply near the $58.00 area looks likely.
Jim Cramer talks about oversold retail stocks on Real Money. Get his insights or analysis with a free trial subscription to Real Money.
Visit here for the latest business headlines.
This article is commentary by an independent contributor. At the time of publication, the author was long Wells Fargo.
