Shares of Wells Fargo (NYSE: WFC) broke out of a cup and handle formation on 1-5-10.



Chart Courtesy of StockCharts.com

CANSLIM fans may be getting a bit excited. Over the last 10 months this method of investing, which requires momentum, has been fair at best. We know, we like it and have found little use for it during the 2009 rally.

Yet, if you look through Investor's Business Daily, where CANSLIM was originated, and where it lives, you can actually see a bit more life in some of their stock chart sections, although, you're still not getting the opportunities to buy Go-Go stocks as in bull markets past.

But, Wells Fargo did form a nice little cup and handle formation over the last 4-6 weeks, and it just broke above its 50-day moving average. Those are two bullish developments for the stock, and possibly for the financial sector.

When a stock like Wells Fargo moves higher, it's almost certainly being bought by institutions. These are the kinds of stocks that big mutual funds like to own. The breakout is a good thing. But now we have to see if the stock picks up steam.

If it does, then it will confirm that the big money is building a position and that the move could last a while. A move above 29 would be a good first move.

We like it well enough to give it 4-stars right now, and 5-stars if it gets above 29. Dr. Duarte does not own shares in WFC. Dr. Duarte owns shares in the Financial Sector ETF (NYSE: XLF).

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