Wells Fargo and Peers: Should You Bank on Them and Buy the Dip?

Wells Fargo and Peers: Should You Bank on Them and Buy the Dip? ...

Even if the stock is down around 0.5%, Wells Fargo (WFC) stocks are good on Monday.

After gaining 5% in the previous week's trade, the stock started the week off as much as 2.25 percent in early trading.

Despite the reports, bulls are busy buying the dip, which is no surprise given the recent banking performance.

The stock of Wells Fargo has increased by more than 17% in the last four weeks. It's not the most impressive recent performer among the major banks. But it is still the best performer of the group in the last 12 months and year to date.

Trading Wells Fargo

Wells Fargo stock chart is displayed on this page.

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After the stock significantly rose on the earnings report, Wells Fargo's stock made a positive move, clearing $44.50. This was a support level in May and August.

The bank's stock has been rising for the last two weeks, with a 2.2 percent rise on Wednesday and Thursday and another 1.5 percent on Friday. And the rise has put the stock on the verge of a 38.2% return.

If Wells Fargo can break through the $46.25 area, which was support in the first quarter, and resistance in the second quarter, the door to higher prices opens.

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The 50% retracement comes into play near $48.50, while the 200-day and 50-week moving averages come into play just below that. $51.50 is on the table above that.

On the downside, the bulls want to see the 10-day moving average come into play as support near $44 to $44.50, allowing for earlier resistance to propel the stock.

If these levels do not provide support, it becomes a bit more concerning.

The 50-day moving average is in play, although it had been resistance until it was reclaimed in July, but it will need to be support if Wells Fargo pulls back and the bulls want to remain in command.

Bank Stocks are traded broadly.

The XLF ETF's Daily Chart

TrendSpider.com provides this chart as acourtesy.

Today, looking out a bit to the Financial Select Sector SPDR Fund (XLF), we saw a similar buy-the-dip reaction.

The bulls want XLF to take out the $35.50 to $36 area on the upside. This area was support in the first quarter and resistance in the second quarter. Plus, this is where the 50% retracement comes into play.

In that sense, the structure is similar to Wells Fargo.

The bulls want active support via the 10-day moving average, to bolster the XLF, and $34 to act as support, below that puts $32.50 to $33 in play and the 50-day moving average.

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