Technical Analysis

Wells Fargo losing boost needed to recoup losses

By Antreas Themistokleous

12 January 2023

Wells Fargo & Company (symbol ‘WFC’) stock made significant losses (down 17%) in the last month of 2023, but it is currently regaining some of the losses this week.

The bank is expected to report its earnings for Q4 2023 on Friday 13 January, before market opens. The consensus EPS is at $0.63 (USD), compared to the result for the same quarter last year of $1.68.

After the FOMC minutes on 4 January, where the FED officials stated that they see higher rates for ‘some time’ ahead, it is only reasonable to assume that the banks shares might have room for expansion in Q1 and Q2 2023.

Traditional monetary tightening is good news for large retail banks, because it enables them to increase their margins and ultimately their valuations.

Based on technical analysis, WFC should continue to regain December losses, possibly finding resistance on the 38.2% daily Fibonacci retracement level. The Bollinger bands are retracting, indicating dried up volatility. And with the last 3 sessions (at the time of this report) creating doji candlesticks, we might assume that the $43 area is a strong technical resistance level on the price.

With the Stochastic indicator on route for the overbought level, we might see a correction to the downside in the coming sessions, prior to the earnings report release on the 13th. If this scenario is confirmed, we might expect some support around the $40 price area, assisted by the psychological support of the round number, the 20-day moving average, and the 23.6% level of the Fibonacci retracement.

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