Wells Fargo (WFC) - Get Report is trading at new March lows Monday after reporting February retail-customer activity. This drop has pushed the stock below a key trend line that links the January and February lows. An important top now appears to be in place and the result could be a steep pullback in the near term.
WFC's post-election surge consisted of two powerful rally legs. During the initial stage, the stock ramped over 20% before running out of steam near $54.00. WFC rested for the final two weeks of November before breaking out again on Dec. 1. This rally phase lifted shares another 10% before heavy resistance near the 2015 peak capped the move. The stock entered a six-week pullback after peaking near $58.00 on Dec. 8. It wouldn't be until Jan. 25 that WFC would return to rally mode.
In February, WFC reached a new post-election high and put in another monthly high as March began, but it was clear that upside momentum was easing. The stock has been drifting sideways since the March 1 peak, but now a pullback appears to be on the way. For patient investors, lower entry opportunities will be the result. A retest of key support near the 50-day moving average, which held the January and February lows, is likely ahead. If this area is unable to hold, a much deeper pullback could develop rather quickly.