Stock of the day: Wells Fargo

In today’s analysis we’re coming back to Wells Fargo, which we analysed for the first time back on March 4^th of this year. Back then, the price was creating a very nasty looking bearish pattern but on the other hand the price was on a crucial support. At the time, this was our conclusion:

“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.”

Initially, WFC chose the bearish option. After breaking the supports, the price quickly dropped towards the 46.5 support. After that, we had a bullish correction and another drop. Does that sound familiar? Yes, that’s how the right shoulder of a Head and Shoulders pattern (yellow) is created.

46.5 USD (green) is now the most important support. It’s the neckline of the H&S mentioned above. Last week, the price managed to use those levels as a support bouncing of it with a nice hammer candlestick pattern. As long as we stay above the green area, buyers can still have hope but should the price close a day below the green area, that would mean a very strong sell signal.