Wells Fargo: I'm Not Buying The Turnaround Story (Technical Analysis)

The narrative that Wells Fargo (WFC) is finally turning the corner has gained traction in recent months, fueled by modest improvements in loan growth and cost-cutting efforts. But a closer look at the technicals tells a different story. While moving averages suggest optimism, critical indicators like overbought conditions, weakening momentum, and key resistance levels paint a far more cautious picture. Let’s break down why the "turnaround" story may be premature—and why investors should proceed with caution.

The Bullish Case: Moving Averages Paint a Rosy Picture

Pro-bull arguments hinge on the strength of Wells Fargo’s moving averages. As of May 2025, the 20-day, 50-day, 100-day, and even the 200-day EMAs all sit below the stock’s price of $72.45. This creates a "rising staircase" of support, with the 200-day EMA at $65.83 acting as a long-term floor. Such a setup typically signals a bullish trend, as each average reinforces upward momentum.

But here’s the catch: moving averages lag behind price action. While they confirm trends, they don’t predict future direction. For WFC, this means the current bullish setup could unravel if key resistance levels fail—a risk we’ll explore next.

The Bearish Reality: Overbought Conditions and Weakening Momentum

The Relative Strength Index (RSI) is a key red flag. As of May 11, 2025, WFC’s RSI hit 72.5, firmly in overbought territory (traditionally above 70). This suggests the stock is overvalued in the short term, with a high likelihood of a pullback.

Meanwhile, the MACD (Moving Average Convergence Divergence) tells an even bleaker story. The indicator’s line (1.35) has dipped below its signal line, a classic sell signal. This divergence between price (still near $72.50) and the MACD’s bearish reading hints at waning momentum—a common precursor to a trend reversal.

Resistance Levels: The $77 Ceiling and What It Means

The stock’s near-term resistance sits at $77, a level it has struggled to breach for months. Breaking through this barrier would validate the bullish narrative, but the chart shows no such breakthrough yet. Instead, WFC has oscillated between $61 (strong support) and $77 since late 2024.

A failure to sustain momentum above $77 could trigger a sharp decline toward $61, wiping out gains from the past year. Investors should note that the Fear & Greed Index for WFC sits at 39 ("Fear"), reflecting skepticism about its ability to climb higher.

Volume and Trend: The Hidden Weakness

While price trends look bullish, volume tells a different story. The analysis notes a negative volume correlation, meaning volume declines as prices hit recent highs or lows. This weakens the reliability of the current uptrend. In other words, buyers aren’t stepping in with conviction at higher prices—a critical flaw in any sustainable rally.

Conclusion: Why the Turnaround Narrative Falls Short

The technicals present a fragile picture for Wells Fargo:

1. Overbought RSI (72.5): Suggests a short-term correction is overdue.
2. Bearish MACD: Indicates fading momentum, with the line below its signal.
3. Key Resistance at $77: A breakout is needed to validate the trend; failure risks a drop to $61.
4. Weak Volume: Buyers aren’t confirming higher prices with conviction.

While moving averages offer hope, the lack of momentum and overextended conditions make this a risky bet. Until WFC convincingly breaks through $77 and reverses bearish technicals, the "turnaround" story remains unproven.

Investors would be wise to wait for confirmation—or consider hedging with put options to protect against a potential pullback. The data doesn’t lie: Wells Fargo’s technicals are far from settled.

Data as of May 11, 2025. Always consult a financial advisor before making investment decisions.