Black Friday is behind us, which means the 2013 holiday shopping season is in full gear/madness. Numbers for holiday sales should start pouring in soon, and some stocks are already moving in response to the headlines.
Walmart (WMT) reportedly had more than 10 million transactions between 6:00pm and 10:00pm on Thanksgiving evening. More than 30 million people planned on shopping on Black Friday alone, which meant big crowds and the inevitable occasional “safety issue.” In 2008, a Walmart employee died as a result of stampeding shoppers in New York state, which has led the retailer to beef up security ever since.
This year, WMT distributed wristbands for its evening special deals, which helped distribute the crowds. The wristbands allowed customers to return to the store two hours after the event to pick up the items. Despite increased security, however, several fights broke out over special deals.
From a trader’s perspective, big crowds can mean big news for a stock like WMT, which in turn can mean price action in the stock. During last Friday’s holiday-shortened trading session, WMT edged marginally higher on the day, extending a five-day winning streak, which in the near-term likely puts WMT stock in overextended territory.
On the long-term chart looking back to the year 2000, WMT had been decidedly range-bound until it broke out of the fourteen-year trading channel in July 2012. Since 2000, WMT has found support at least a handful of times roughly around the $43 area, but after last touching this support area in 2007, WMT stock began to form a series of higher lows. The stock eventually broke past the first resistance line (red dotted line) around the $64 mark in May 2012 and broke through a higher resistance line during the July breakout.
Big, long-term breakouts often re-test their breakout line, which WMT did in a technically sound move in late 2012, before rallying higher. So, from this long-term point of view, WMT looks to be in good shape for higher prices.
On the daily chart, the stock broke out of bullish flag formation in early November. Since testing the lower end of the formation in early October, WMT stock has rallied 14% in what at may be a steep move for the near term.
Considering that many other retailer stocks have better near-term charts, traders should stay away from WMT stock for the time being, despite the long-term picture looking solid.
Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.