They say all publicity is good publicity but Wells Fargo may have had too much of a good thing in the past month.
Wells’ chief executive has testified in front of politicians twice and US presidential candidate Hilary Clinton specifically lambasted the firm in a speech to voters. Still, the attention is warranted when a bank fraudulently creates two million accounts on behalf of its customers without their knowledge or consent.
Interestingly, despite all the political fallout – the shares have held up relatively well. In the past few years Wells Fargo took over the mantle of the biggest bank in the US and has proved to be one of the more stable names in a troubled sector. Wells Fargo doesn’t have a prominent investment bank that has suffered from dried up fixed income trading volumes, and thanks to its mortgage business, has benefited from an improving US housing market.
This quarter’s earnings could be the big decider for whether some of its more loyal shareholders hold onto their stake in the bank.
In the chart below, it can be seen that $44.50 has been a strong support level. Should $44.50 give way, the floodgates could be opened for the shares to retrace half of the gains since the 2009 low to former resistance turned potential support at $34.
Seven-year candlestick chart of Wells Fargo shares
Source: CMC Markets, 6/10/16
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