Shares of Wal-Mart Stores Inc (NYSE:WMT) on Tuesday rose nearly 0.7% while the broader stock market experienced selling pressure. WMT stock bulls surely could come up with a myriad of reasons why this bounce was great and how the stock is a defensive play when turmoil hits the stock market.
From where I sit, however, one day does not make a trend, but the stock does offer an interesting trade with well-defined reward-to-risk from a technical perspective.
As the debate rages on whether Walmart can survive the battle against Amazon.com, Inc. (NASDAQ:AMZN), there will likely be plenty of volatility around WMT stock’s longer-term trajectory.
While it is crucial to gain perspective on any given market or stock through different time frames, it is just as critical to respect the fact that a near-term time frame often time has little to do with a longer-term one through a trading lens. This arguably holds even more true when a multiyear chart looks as ‘messy’ as that of WMT stock currently does.
In other words, a near-term trade sometimes is just that and should be treated in isolation of a bigger picture trend … again, particularly if the multiyear chart paints an aimless roller coaster-like picture.
WMT Stock Charts
Looking at the multiyear chart of WMT stock we see that after a failed rally attempt in late 2014, the stock quickly and severely reversed course in 2015, leading to a nearly 40% peak-to-trough move in about eleven months.
From November 2015 into this past May, the stock then lifted by more than 40%. What makes this so crazy to many fundamental investors is that this is supposed to be an old steady stock and not a highly volatile mover.
In my eye, what many longer-term investors are missing at this juncture in WMT stock is that the retailing industry is going through a revolution as online shopping becomes an ever larger part of people’s daily lives. That in turn leads to more volatility in older brick-and-mortar names like Walmart, who however is doing their best to foray into the online world in a more meaningful way.
On the daily chart, we see that while WMT stock is still higher by about 10% year-to-date, it took a good hit along with other retailer stocks on June 16. Through the lens of technical analysis, that move, however, merely took off some of the near-term overbought readings in the stock as it found support in a confluence zone made up of horizontal (black line) support as well as the blue 100 day simple moving average.
The setup here is a straightforward so called “gap-fill” trade, whereby one bets on the down-gap (marked by the blue box) from mid-June ultimately gets filled if the stock rallies. Over the past six trading days, WMT stock has consolidated nicely and a push and hold above $76.50 could start to fill the gap with an upside target closer to $79. Any bearish reversal would be a stop-loss signal. Remember, one can always get back into a trade.
Check out Anthony Mirhaydari’s Daily ÃÛÌÒ´«Ã½ Outlook for June 28.
to find out which trading strategy best suits your personality.
Tell us what you think about this article! Drop us an email at editor@investorplace.com, chat with us on Twitter at or on Facebook. Read more about our comments policy here.
