Wells Fargo Stock Moves Higher After Earnings

Call options traders have been flocking toward the banking name

Managing Editor
Oct 12, 2018 at 10:10 AM
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Shares of Wells Fargo & Co (NYSE:WFC) are moving higher in early trading, after the banking firm this morning posted third-quarter results. Though earnings fell just shy of estimates, revenue was slightly better than expected, with CFO John Shrewsberry adding that the company saw "positive business trends" during the quarter. As such, the stock is up 0.9% at $51.88, possibly benefiting from a halo lift as sector peers JPMorgan Chase (JPM) and Citigroup (C) gain after earnings beats of their own.

After being the face of controversy in the banking sector for some time, Wells Fargo stock has struggled to gain momentum on the charts. The shares remain well below their January peak near $66, with the 20-day moving average acting as resistance in recent weeks. This trendline corresponds with the equity's year-over-year breakeven point, suggesting an area of double-barreled resistance is in place.

Despite this disappointing performance, there remain plenty of bulls surrounding WFC. For example, 10 brokerage firms still have "strong buy" ratings on the security.

Digging deeper, WFC options traders have been leaning bullish during the past 10 weeks of trading. This is per the stock's 50-day call/put volume ratio of 2.23 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 74th percentile of its annual range. This shows that calls have been purchased over puts at a faster-than-usual clip.

Lastly, echoing the above sentiment is the Schaeffer's put/call open interest ratio (SOIR) of 0.62, which ranks in the low 4th percentile of its annual range. In other words, short-term options traders have been extremely call-skewed toward WFC.

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