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Trading Wells Fargo Near Key Support and Ahead of Earnings

Wells Fargo has underperformed its peers for a while now. Will earnings change the narrative? Let's look at the chart.

Well Fargo  (WFC) - Get Wells Fargo & Company Report has been all over the headlines lately, as have the other major banks.

The group is set to report earnings next week. JPMorgan  (JPM) - Get JPMorgan Chase & Co. (JPM) Report and Goldman Sachs  (GS) - Get Goldman Sachs Group, Inc. (GS) Report will report on Tuesday, while Wells Fargo, Bank of America  (BAC) - Get Bank of America Corp Report and Citigroup  (C) - Get Citigroup Inc. Report report on Wednesday.

Expectations are calling for revenue declines.

For Wells Fargo, the stock has been in the news even more. Earlier this week, it ended its personal credit lines, which knocked the stock lower by 2.5% on Thursday. 

It was the fourth down day in a row for the San Francisco company's stock.

Obviously the volatility in the stock market didn’t help matters and the fluctuation in interest rates had bank stocks moving somewhat wildly. The group is up nicely on Friday. 

Despite recently positive stress test results, investors have been hesitant to own bank stocks.

With bank earnings on tap, what does Wells Fargo stock look like?

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Trading Wells Fargo Stock

Weekly chart of Wells Fargo stock.

Weekly chart of Wells Fargo stock.

Wells Fargo has drastically underperformed many of its peers. What was once a coveted bank stock trading at a premium now trades at a discount to its peers.

In March, the 61.8% retracement rejected Wells Fargo stock, but about a month later the shares were able to push through this measure. The 61.8% retracement then turned to support — a bullish technical development — as the 78.6% retracement became resistance.

Pinballing between these measures now, Wells Fargo also has has various moving averages on various time frames it needs to navigate.

For now, the 21-week moving average continues to hold as support.

Next week, I will be watching this level closely with earnings on tap. That’s particularly true with this week’s nice bounce off this measure. A break of the 21-week moving average and this week’s low puts the 61.8% retracement back in play.

Below that and Wells Fargo could see $40 and the 10-month moving average.

On the upside, the 10-week and 200-week moving averages are acting as resistance. If Wells Fargo can clear these measures, it puts the $47.50 level and the 78.6% retracement in play.

Above all of these marks, and the 2021 high at $48.13, could open up a return to the $55 area.