Stock of the day: Wells Fargo

In today’s piece we’re looking at Wells Fargo, the financial giant from the state of California in the US. The reason we’re mentioning Wells Fargo today is the nice bearish setup we see on the daily chart, which is just one step from activation. And this step doesn’t necessarily have to be huge.

In January, Wells Fargo created a massive double top formation (yellow). That’s usually a very strong sell signal, especially when the highs are steep as they are here. A double top gives us a strong sell signal only when there’s a breakout of its neckline. In this case, the neckline is the blue horizontal support, corresponding with the tops from August and November. In addition, we have a 23,6% Fibonacci and the long-term uptrend line (black).

All of that creates a situation where the current support looks really strong. That’s good for us because it means that the possible breakout should be a significant one. The price breaking the combination of those three supports could trigger a proper sell signal. On the other hand, the price bouncing and reversing to the upside would create a nice bullish opportunity.