Here is your Bonus Idea with links to the full Top Ten:
Wells Fargo (NYSE:WFC), is not only one of Warren Buffett’s favorite banks for good reason. The stock had a strong move higher from a 2011 low to the high in mid-2015. It rose over 160% in that span before commencing a pullback. If you remember, that is when the Fed suggested that they would at some point stop providing accommodation to the markets. The pullback retraced 38.2% of the run higher before finding support.
The price bounced off of that support three times over 2016 and started a move higher off of the last time. It gathered strength as it passed above 51, the 2016 high level, meeting resistance at a price of 57 in December. The digestive pullback from there found support quickly and has reversed back to 57. This gives a target to 67 on a Measured move. The broader price action back to 2011 is building an AB=CD pattern as well with a completion at 80.
Momentum is strong with the RSI in the bullish zone and moving higher. The MACD is also rising and bullish. The Bollinger Bands® are moving higher, as are the SMA’s. The trend higher looks to continue. The stock has very low short interest at less than 1% and has just passed its earnings report and dividend ex-date. Both will not happen again until mid-April.
The February monthly options chain shows largest open interest at the 57.50 Strike on the Call side. It is also large above at 60 and on both sides below at 55. The April chain shows a similar mix, with the Call side biggest from 55 to 60 and large Put open interest at 55, but also big at 50. Farther afield, the January 2018 expiry options show Put activity centered on the 45 strike and at 55 on the Call side. Finally the January 2019 options have far and away the most open interest at the 55 Call strike then the 60 Calls. All this points to stable expectations.
Wells Fargo, Ticker: WFC
Trade Idea 1: Buy the stock on a move over 57.50 with a stop at 53.
Trade Idea 2: Buy the stock on a move over 57.50 and add an April 55/50 Put Spread ($1.00) for protection, funded by selling an April 60 Covered Call ($1.01 credit).
Trade Idea 3: Buy the April 57.5 Call ($2.15) and sell an April 55/50 Put Spread ($0.95 credit).
Trade Idea 4: Buy the January 2018 Expiry 57.5/62.5 Call Spread ($2.25) and sell the January 45 Put ($1.65 credit).
Trade Idea 5: Buy an April/January 2019 Expiry 60 Call Calendar ($5.45) and as April approaches look to roll the short calls up and out to June for another credit.
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with the first FOMC meeting of the year and the employment report behind, saw the Equity markets had a strong week and look primed for the next leg higher.
Elsewhere look for Gold to continue in its short term uptrend while Crude Oil churns with more sideways price action. The US Dollar Index looks to continue to the downside, although it is at a good support area should it want to reverse, while US Treasuries are biased lower.
The Shanghai Composite looks to continue to drift around resistance but higher and Emerging Markets look to continue their recent strength. Volatility looks to remain at exceptionally low levels keeping the bias higher for the equity index ETF’s SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts all look strong on the weekly timeframe and are at the edge of breaking out of ranges on the daily timeframe. Use this information as you prepare for the coming week and trad’em well.
DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.