Wells Fargo Plummets 4.7%: Earnings Triumph Overshadowed by Revenue Woes and Bearish Technicals?

Summary
• Wells Fargo (WFC) slumps 4.7% intraday to $89.16, erasing a $4.39 opening gain
• Earnings beat of $1.76/share vs. $1.66 estimate clashes with $21.29B revenue shortfall
• Technicals signal short-term bearish engulfing pattern amid 52W high of $97.76

Wells Fargo’s stock is in freefall despite a headline earnings beat, as revenue misses and bearish technicals collide. The bank’s shares have swung from a $90.80 intraday high to a $88.77 low, reflecting investor anxiety over growth constraints and regulatory hurdles. With the 200-day MA at $80.61 looming as a critical support level, traders are scrambling to decipher whether this selloff is a buying opportunity or a warning sign.

Revenue Miss and Regulatory Uncertainty Fuel Short-Sellers
Wells Fargo’s 4.7% intraday drop stems from a combination of revenue disappointment and lingering regulatory skepticism. While adjusted earnings of $1.76/share exceeded estimates, the $21.29B revenue figure fell short of $21.64B expectations, raising concerns about the bank’s ability to capitalize on its recent regulatory relief. CEO Charlie Scharf’s comments about operating under 'significant constraints'—despite the removal of the asset cap—have left investors questioning the pace of growth. The bearish engulfing candlestick pattern on the daily chart, coupled with a MACD histogram turning negative, amplifies the bearish sentiment.

Banks Sector Mixed as JPMorgan Holds Steady
Bearish Options Playbook: Puts with High Leverage and Gamma
• 200-day average: $80.61 (below current price)
• RSI: 47.11 (neutral to bearish)
• MACD: 1.51 (signal line 1.85, histogram -0.34)
• Bollinger Bands: $91.50 (lower band) vs. $97.09 (upper band)
• Key support/resistance: 30D $94.19–94.41, 200D $85.77–86.48

With WFC trading below its 30D MA ($92.73) and within the lower Bollinger band, the technical case for a continuation of the downtrend is strong. The 200-day MA at $80.61 represents a critical psychological level for long-term holders. For aggressive short-term bearish plays, two options stand out:

• WFC20260123P87
- Type: Put
- Strike: $87
- Expiration: 2026-01-23
- IV: 33.04% (moderate)
- LVR: 98.35% (high leverage)
- Delta: -0.2886 (moderate sensitivity)
- Theta: -0.0195 (slow decay)
- Gamma: 0.0698 (high sensitivity to price moves)
- Turnover: 30,503 (liquid)
- Why it works: High gamma ensures rapid premium erosion if WFC breaks below $87, while the 98% leverage ratio amplifies returns in a 5% downside scenario (projected payoff: $2.00).

• WFC20260123P85
- Type: Put
- Strike: $85
- Expiration: 2026-01-23
- IV: 34.06% (moderate)
- LVR: 190.43% (extreme leverage)
- Delta: -0.1698 (moderate sensitivity)
- Theta: -0.0264 (moderate decay)
- Gamma: 0.0501 (high sensitivity)
- Turnover: 6,855 (liquid)
- Why it works: The 190% leverage ratio creates outsized potential if WFC closes below $85 by expiration, with a 5% downside scenario yielding a $4.16 payoff. The moderate delta balances risk/reward.

Action: Aggressive bears should prioritize WFC20260123P87 for its liquidity and gamma advantage. Watch for a breakdown below $88.77 (intraday low) to confirm the bearish thesis.

Backtest Wells Fargo Stock Performance
The backtest of Wells Fargo's (WFC) performance after an intraday plunge of -5% from 2022 to the present shows favorable short-to-medium-term gains. The 3-Day win rate is 53.94%, the 10-Day win rate is 57.36%, and the 30-Day win rate is 60.98%, indicating a higher probability of positive returns in the immediate aftermath of such events. The maximum return during the backtest period was 4.60%, which occurred on day 59, suggesting that WFC can generate decent gains even after a significant pullback.

Short-Term Bearish Playbook: Target $85 Support with Precision
WFC’s 4.7% intraday drop reflects a clash between earnings optimism and revenue pessimism, amplified by bearish technicals. While the long-term PE of 13.8 suggests undervaluation, the immediate focus is on the $85–87 support cluster. JPMorgan (JPM) remains the sector leader, down just 0.5%, indicating broader banking sector resilience. Traders should prioritize the WFC20260123P87 put for a high-gamma, high-leverage play if the stock breaks below $88.77. A close below $85 would validate the bearish case, with the 200-day MA at $80.61 as the next critical target. Watch for $85 breakdown or regulatory reaction.