For almost three years now, the stock ofWells Fargo (
) has been rangebound.
Resistance appeared around 34 in 2010-11 and around 36 last
year. Support was found near 23 in 2010-11, but switched to 30 to
31 in 2012.
The rise of the support level is a positive development. The
current base is now shallower and tighter than those in
Despite being less than 15% deep, the current base looks more
like a cup with handle than a flat base. The stock formed a
couple of handles, but could not rally from either.
A third handle forming now shows quieter volume than the
previous handles, which is desirable. The potential buy point is
The base shows some net accumulation, which is good.
Because of the rangebound action, Wells Fargo's Relative Price
Strength Rating is a mediocre 49.
The fundamentals, though, have been slowly improving. Return
on equity fell as low as 5.2% in 2008, but was 12.5% last year.
Ideally, ROE should be 17% or better -- a level last achieved at
Wells Fargo in 2004-07.
Wells Fargo's EPS Rating is 90, putting the stock in the top
10 percentile in earnings growth. The earnings Stability Factor
also has improved. The five-year number is 29, but the three-year
number is 5. The range runs from 0 (calm) to 99 (wild). The
bank's earnings growth accelerated from 12% to 17% to 22% to 25%
the past few quarters.
The Banks-Money Center industry group was No. 19 among 197
groups, as of Friday's IBD. About four months ago, the rating was
middle of the pack.
often restrict their buys to leading groups.
Of the 16 stocks in the group trading above 15 a share, only
one has a higher EPS Rating than Wells Fargo --JPMorgan Chase (
), at 95.
Wells Fargo announced it is raising its quarterly dividend
from 22 cents a share to 25 cents a share, beginning with the
March 1 payment. The annualized yield is 2.9%.
The company lowered its quarterly dividend from 34 cents to 5
cents a share during the 2008 financial crisis, but raised it to
12 cents in April 2011.