Wachovia Tests New Lows

May 29, 2008: 10:43 AM CST

Let’s do a quick check on Wachovia Bank and the XLF Financial Index to see what interesting development has happened this week.

First, Wachovia’s (WB) weekly structure chart:

Price made a new intra-week low this week, testing just below $24 per share, but it did so on a developing positive momentum divergence (not drawn).  The trend is still sharply down, and the regional bank stock has fallen over 50% from its 2007 highs prior to the “Credit Crisis” taking hold.

This structure will be difficult to overcome.

Let’s peek at the Daily Chart:

Price broke a rectangle consolidation pattern to the upside (I actually drew in two possible bottom trendlines for the triangle pattern), but not only did the pattern fail to meet its price objective, but the pattern has now become a ‘busted’ pattern which tricked the buyers into participating before rolling back over insidiously and breaching its key 20 and 50 period moving averages first to the upside and then to the downside.

Traders on both sides of this stock (long and short) were frustrated by that fake-out move I’m sure.  What could be forming now is a potential “Double Bottom” formation in the stock.

With Wachovia testing new lows, the XLF Financial Sector actaually is making higher lows, which could bode well if that development leads to further price appreciation.

The Index is making a higher low above its March lows, which could signal a potential reversal coming up, but the price has flatlined (consolidated) more than trended, which could be a sign of larger accumulation or some other form of price stabilization.

Let’s continue to keep our eye on this development, because many traders believe “Where the Financials Go, So Goes the Market.”

2 Comments

2 Responses to “Wachovia Tests New Lows”

  1. Richard Says:

    The overall stock market to bank ratio, VTI:KBE, is 3.67; this leverage of stocks over credit cannot be maintained.

    I provide extensive commentary as to why banks and investment bankers are going to be falling lower in value soon.

  2. burdickrobert Says:

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