Tuesday, May 5, 2009

Having Seller's Remorse on Wells Fargo...

So the government regulators supposedly have told Wells Fargo (WFC) that the bank need to raise new capital, according to various news sources, and the stock jumps 23%.

I've been long WFC since late March when the stock was $15. Today, as I was watching the stock just keep going up and up, what I felt was not joy but fear. Now what? My head went blank. It has been stomach-churning 5 weeks of holding this stock, even though it dipped below my buy price for only three days (right after I bought it... that was bad). Candlesticks on the daily chart for the past 4 weeks are almost exclusively "hangman" or "hammer", and they looked like they would fall off for no reason at all. So all I could think was SELL. And so I did.

There were actually technical and non-technical reasons why I bought that stock to begin with. Technical: It popped through 50-DMA on daily, and came back down to it on a lower volume. Non-technical: 1) Banks were vilified, shorted heavily. Short side at that point looked too crowded; 2) local WFC branch people were always nice and helpful, unlike local BAC.

So, after I sold, I immediately got the seller's remorse. Too late. Partly to justify my sale, I took a look at the longer-term weekly chart, and I'm pretty happy with my panick decision. While I do think there may be still a momentum left (weekly RSI still barely above 50), the stock just hit weekly 50-MA (daily hitting 200-DMA) and seems to be entering the very jagged overhead from October 2008. It is possible that the stock can clear that and hit the all time high, but the next $8 may be harder to come by than the $8 that I just bagged. So I'll move on, for now.

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