Shares of Wal-Mart Stores Inc (NYSE:WMT) on Friday, April 7, rose a little more than 2% on the day. More importantly, WMT stock scored a marginal technical breakout in the short-term.
While many market participants remain skeptical of Walmart’s ability to break higher from here, the charts have been more constructive than they have for a long time.
When I hold my twice-weekly calls with my inner circle of hedge funds and institutional investors, the topic of WMT stock versus Amazon.com, Inc. (NASDAQ:AMZN) comes up at least half of the time. The posturing of many of these investors remains clearly in favor of AMZN stock given the behemoth’s amazing track record of taking over the lead in many areas of retail and beyond.
While I certainly believe in Amazon’s ability to continue to innovate and grow, and while I believe in Amazon shares long-term, Walmart is doing a few good things of its own. It’s not only improving its physical stores, but meaningfully expanding its online platform.
When I last discussed WMT shares on Feb. 27, I said the stock could be a pleasant surprise for 2017. Specifically, I near-term pointed to the $72.50 level and said if and when it could be overcome on a daily closing basis, a next upside target in the mid-$70s would open up, followed by the high $70s or low $80s as next possible upside targets. Until last Friday, Walmart hadn’t been able to overcome $72.50 on a daily basis.
Now, it’s time to update this trade idea.
WMT Stock Charts
On the multiyear weekly chart, we see that ever since breaking below its red 200-week simple moving average in the summer of 2015, Walmart has respected it as technical resistance.
Note that this area around the $72-$73 levels also allows us to draw a simple line of horizontal resistance. If and when this area can be overcome on a weekly closing basis, it may turn into technical support.
On the daily chart, we see that the corrective phase Walmart had been in from August 2016 into January of this year has carved out a bullish pattern that could be looked at in several ways.
One way is to look at the price action as a big bullish flag formation that, with a breakout above $70 in February, has already given us bullish confirmation of a move higher. Another way is to note the inverse head-and-shoulders pattern marked by the three blue triangles, which also points to a move into the high $70s or low $80s over time.
Last Friday WMT stock broke past horizontal resistance around $72.50 that had been firmly in place since September 2016 and thus may have ignited a move into the mid to high $70s for now.
Any bearish reversal that sees WMT st0ck close back below $71 would be a stop-loss signal for any swing trades long.
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