Wells Fargo's (WFC) ugly news-inspired breakdown back on March 21 left behind an ominous top near $60.00. The stock managed to rebound somewhat toward the end of the month but the intense overhead pressure remained in place. As this month began, WFC was falling again and by the middle of last week the stock reached new 2017 lows with the help of a big jump in volume.
Late last week, WFC began to test a major support zone near $52.00. This key area includes a series of 2016 monthly highs as well as an upward sloping 200-day moving average. With the stock now in oversold territory, and down over 15% from the February high, signs of stabilization are beginning to form. For patient WFC investors, a low-risk entry opportunity near $52.00 is developing.
In the near term, WFC should be considered a low-risk buy on weakness. The support zone now runs from $52.50 to $51.50. If shares can continue to base here, a significant rebound could develop. An important hurdle will be the March lows near $54.25. On the downside, a close below $50.00 would be a clear indication that more downside is ahead before a solid bottom can be found.
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