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Featured Trade (US Stock): Wells Fargo reacted off below key resistance

Medium-term technical outlook (1-3 weeks) on Wells Fargo (WFC)



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Key technical elements

  • The on-going 17% rebound from its recent 26 Dec 2018 low of 43.02 has started to react off right below a key medium-term resistance at 51.25. In the past 2 weeks since 25 Jan 2019, the share price of WFC has started to slip by 3.6% to print a low of 48.71 on 04 Feb 2019.
  • The 51.25 key resistance is defined by the former neckline support of a major bearish “Head & Shoulders” configuration that was broken to the downside on 06 Dec 2018, 61.8% Fibonacci retracement of the recent steep decline from 03 Dec 2018 high to 26 Dec 2018 low and a medium-term descending trendline from 27 Aug 2018 high (see daily chart).
  • Momentum indicators are not supporting a “bottoming” process despite its recent swift up move seen in the price action. The weekly RSI oscillator has not displayed a bullish divergence signal and the daily RSI oscillator has traced out a bearish divergence signal as price actions continue to push higher from 18 Jan to 25 Jan 2019.
  • The next significant medium-term supports rest at 47.00 (swing low areas of 08/15 Jan 2019 & 50% Fibonacci retracement of the rebound from 26 Dec 2018 low to 25 Jan 2019 high) and 44.70/43.02 (former major swing high area of Sep 2008 & 26 Dec 2018 low).

Key Levels (1 to 3 weeks)

Immediate resistance: 50.40

Pivot (key resistance): 51.25

Supports: 47.00 & 44.70/43.02

Next resistance: 55.00

Conclusion

WFC may kick start another leg of impulsive down move towards the 47.00 support in the first step if the 51.25 key medium-term pivotal resistance is not surpassed. A break below 47.00 sees a further potential decline to retest 44.70/43.02 next.

On the other hand, a clearance above 51.25 opens up scope for a further corrective squeeze up towards the next resistance at 55.00 (the pull-back resistance of the former long-term secular ascending channel support from Mar 2009 & range top of 17 Oct/03 Dec 2018).

Charts are from eSignal



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