Wells Fargo Company (WFC) will report earnings in the pre-market session on Tuesday morning along with several other financials. The heavily beat down sector is sure to see movement one way or the other depending on the market's reaction to the reports. Below is a weekly chart of WFC's price action over the last two years. Focusing on these longer term levels should give traders a good idea of where price is likely to head and stall out during emotionally charged days such as earnings reports.
If the reaction is negative and WFC opens and holds below Monday's hammer lows at $26.37, it is likely to retest last week's low price just above $25 and perhaps even move towards the $24 area. If it were to gap down to these levels, then it would be prudent for traders to not chase the move keep an eye for waning momentum. If the reaction to the eps reports are positive and WFC can rally past the low $27 area, then it is likely to retest the price action just below $29 that has been a significant psychological price level over the last two years. If price were to gap up to these levels, it would again be prudent for traders to not chase and instead keep an eye out for a countermove instead.
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