Wells Fargo shares edge up on Tuesday, bank faced with restrictions as it fails “living will” test

On December 13th US regulators imposed restrictions on Wells Fargos ability to expand its business, meaning that the San Francisco-based financial institution may not found international bank entities or acquire non-bank subsidiaries. The ruling added to the banks recent woes over its high pressure sales campaign, which urged employees to create 2 million deposit and credit card accounts without being permitted by clients. In relation with the sales scandal, Wells Fargo laid off 5 300 branch employees, while the bank’s former CEO, John Stumpf, resigned.

Wells Fargo shares rebounded slightly on Tuesday, following their largest daily drop since September 13th. The stock edged up 0.11% ($0.06) to $55.84, after falling to as low as $55.29 during yesterdays session, or a level not seen since December 7th. In the week ended on December 11th Wells Fargo shares soared 6.64% compared to a week ago, which marked their strongest weekly performance since the week ended on November 13th. The stock has gained 5.52% so far during the current month, after climbing 15.02% in November. The latter has been the stock’s best performance since May 2009. Back then Wells Fargo shares jumped 27.44%.

Tuesdays decision by regulators marked the second time during the current year, when the NYSE-listed bank failed a “living will” test. Such tests were initiated in the wake of the 2008-2009 financial crisis, when a series of shock waves coming from the bankruptcy of a number of Wall Street banks shuttered markets across the globe.

The San Francisco-based lender is among 8 major banks, which need to demonstrate how they would be unwound in an orderly manner in case of a bankruptcy. In April, 5 banks fell short of an initial assessment, with Wells Fargo being one of them. It became clear that State Street Corp, JPMorgan Chase & Co, Bank of New York Mellon and Bank of America Corp all passed the “living will” test yesterday.

Following the regulators decision, Wells Fargo & Company may end up with an order to shrink in two years time, unless it firms its business.

Wells Fargo may be given the chance to deliver an amended living will by March 31st 2017, while the limitations imposed may then be lifted, in case the Federal Reserve Bank and Federal Deposit Insurance Corporation permit it.

Daily and Weekly Pivot Levels

With the help of the Camarilla calculation method, todays levels of importance for the Wells Fargo stock are presented as follows:

R1 – $55.92
R2 – $56.01
R3 (Range Resistance – Sell) – $56.09
R4 (Long Breakout) – $56.35
R5 (Breakout Target 1) – $56.64
R6 (Breakout Target 2) – $56.77

S1 – $55.76
S2 – $55.67
S3 (Range Support – Buy) – $55.59
S4 (Short Breakout) – $55.33
S5 (Breakout Target 1) – $55.04
S6 (Breakout Target 2) – $54.91

By using the traditional method of calculation, the weekly levels of importance for Wells Fargo & Company (WFC) are presented as follows:

Central Pivot Point – $56.34
R1 – $58.82
R2 – $60.49
R3 – $62.97
R4 – $65.44

S1 – $54.67
S2 – $52.19
S3 – $50.52
S4 – $48.84