Action Alerts PLUS holding Wells Fargo (WFC) has taken a beating behind powerful closed doors, in the media, on the charts and in the court of public opinion. Maybe even Warren Buffett is checking his position more often. At the end of the day, we vote in the marketplace with our orders to buy and sell. Let's examine the price action.
In this daily chart of WFC, above, we can see how the $51 area capped advances in April, May and September. On the downside, dips into the $45-$44 area have been bought. Prices have sold off sharply recently, putting WFC below the declining 200-day moving average line and below the soon-to-be-declining 50-day average. The On-Balance-Volume (OBV) line has been declining this month, telling us that sellers are more aggressive with volume rising on days when WFC has closed lower. Besides this month, the OBV line has been on the defensive the past year. Momentum is not diverging from the price action, unfortunately.
In this weekly chart of WFC, above, we can see prices are below the declining 40-week moving average line. The weekly OBV line has been signaling more aggressive selling for more than a year. The Moving Average Convergence Divergence (MACD) oscillator is rising but from below the zero line. The two lines of the indicator are narrowing toward a new sell signal.
This third chart of WFC is a point-and-figure chart. This old technique is good at clearly finding breakouts and breakdowns. Notice how $44 has marked the bottom of a large trading range. Clearly a trade at $43 will break this pattern to the downside.
If you are holding your position in WFC and it is "under water," then $43 should be a clear signal that your trade is really not working.
