So the Federal Reserve did taper. It was semi-unexpected. At least, I personally didn’t expect it to happen so early. A great “spin” was put on it, however, saying ‘the market was doing quite well and unemployment has already dropped more than anticipated, showing strength in the economy. Therefore, now only $75 billion each month will be used to continue to prop up the market higher. Coming into the end of the New Year, I will remain on my bullish stance until I see reason not to be bullish.
The Financial sector had a strong pop Wednesday with a lot of strong, long day white candles, really showing who is still in control. Wells Fargo & Co. (WFC) in particular is one I’ve been tracking a while, ever since a breakout of a triangle of sorts back in November, represented by the red line. WFC came up and retested a strong resistance around $44.73.
At that time, WFC had another small triangle formation where it allowed all the indicators to really rest and reset, giving this trade plenty of momentum to continue higher. The long term simple moving averages are nice and bullish. Wells Fargo has been making higher lows and is nicely above the 50 exponential moving average.
The candle on 12/18/13 also opened and closed higher than the open and close of the prior day. This is a very strong bullish candle formation. IF WFC closes above $44.95 the most likely trade direction would be bullish.
TRADING STRATEGIES
From there, it is up to individual investors as to which strategy would work best for them. Call option purchases, put sales and stock purchases would all be viable choices at this point. I like the candle, I like the volume and I like the risk mitigation. My next three targets are $47, $47.84 then $48.63. My stop would go below the low of the 12/18/13 candle.
Overall, I’m in love with this trade.
Create a plan for you, plan your trade and trade your plan. Have a great rest of your 2013, everyone, and I will see you in 2014! Until then, remember, I’m here to help. All you have to do is reach out!
