Wells Fargo & Company (WFC), the second largest of the four "too big to fail" money center banks, reports quarterly earnings before the opening bell on Friday. Analysts expect Wells Fargo to report earnings per share (EPS) of $1.05, which assumes that the bank has fully recovered from its fraudulent activities against its depositors. In my opinion, beating EPS estimates will be a challenge. The question is whether the banking giant is still losing clients. Investors should also keep an eye on mortgage lending, which is a major line of business.

The stock closed Wednesday at $63.12, up 4% year to date and in bull market territory at 28.1% above its 52-week low of $49.27 set on Sept. 7, 2017. The stock set its all-time intraday high of $63.40 on Jan. 10, 2018. 

Wells Fargo ended the third quarter of 2017 with $1.76 trillion of assets on its balance sheet, which equates to 10.2% of the entire banking system. This represents a year-over-year gain of 2.2%, so this "too big to fail" bank keeps getting bigger. However, this is the lowest growth among the four "too big to fail" money center banks, as clients jumped the stagecoach given the fraudulent activities against depositors. (See also: Opinion: Wells Fargo Boss Will Vault Over Bank's Woes.)

One issue that baffles me is how the New York Federal Reserve allowed Wells Fargo to become a primary dealer during the height of the fraud. My conclusion is that the biggest banks are also "too big to regulate."

The daily chart for Wells Fargo

Daily technical chart showing the performance of Wells Fargo & Company (WFC) stock

Courtesy of MetaStock Xenith

The horizontal lines show that Wells Fargo is above its monthly and quarterly value levels of $57.42 and $52.89, respectively.

The weekly chart for Wells Fargo 

Weekly technical chart showing the performance of Wells Fargo & Company (WFC) stockCourtesy of MetaStock Xenith

The weekly chart for Wells Fargo is positive but overbought, with the stock above its five-week modified moving average of $59.86. The stock is well above its 200-week simple moving average at $52.73, which is also the "reversion to the mean," last tested during the week of Sept. 22, when the average was $51.79. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 88.95 this week, up from 87.17 on Jan. 5 and moving further above the overbought threshold of 80.00.   

Given these charts and analysis, my strategy is to buy Wells Fargo on weakness to my monthly value level of $57.42 and to reduce holdings on strength to my semiannual and annual risky levels of $65.08 and $67.18, respectively. (For more, see: Why Big Bank Stocks Can Rise 20%: Barclays.)

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