Shares of Wal-Mart Stores, Inc. (NYSE:WMT) have seen a one way street (down) all year, resulting in serious pain for retirement accounts, mutual funds, institutional portfolios and other longer-term stock holders the world over
WMT stock is still down by nearly 30% on the year, and from a trend perspective is nowhere near a resolution.
However, WMT stock has arrived at a critical technical level, which, if overcome, could see it rally more than 10% in a short time frame.
The stock market axiom of avoiding “falling knives” has held true for WMT stock this year. Fundamental analysts were bullish near the January highs, but are cautious at present levels, continuing to buy high and sell low.
To be sure, there were some pockets of analysts raising red flags on WMT stock in late 2014, but as a group the consensus was bullish.
WMT Stock Charts
If we look at this through a longer-term, multi-year lens we see analysts turning bearish on WMT in August as the stock reverted back to longer-term lines of support.
In other words, unless Wal-Mart dramatically loses market share from a decline in middle-class shoppers (not gonna happen for the time being), then WMT stock is currently at bargain levels, at the very least for a trade higher.
To be clear, I am not in the business of calling bottoms in stocks or in any asset class for that matter, but for a trade WMT stock is once again looking attractive.
When WMT began to bounce in November, it did so at the horizontal reference line stretching back to 2008, which acted as resistance until 2011. The big rally that resulted from the 2011 breakout ultimately was overdone with the late 2014 surge, and what followed in 2015 was a nasty mean-reversion move lower.
On the daily chart we see that WMT stock bumped higher in mid-November, but quickly settled back into a consolidation phase. In the meantime, this consolidation phase is finding resistance at the year-to-date red dotted line of resistance.
In recent days the stock has also tried to marginally overcome its yellow 50-day moving average, which it has systematically traded below since February.
Finally, the sideways price action over the past few weeks has the look of a “bull flag” pattern, which has bullish implications upon a break above the $61 area.
A break-and-hold above $61 could see WMT stock move into the mid-to-high $60s toward its mid-October highs.
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