Click to EnlargeWal-Mart Stores (NYSE:WMT) bounced more than 5.00% over the past five trading sessions and is bumping up against important intermediate term resistance. The stock’s performance year to date is relatively in line with that of the S&P 500 but if it can hurdle past resistance, WMT may turn into an outperformer in the intermediate term.
Like most things beta, Wal-Mart Stores rose sharply last summer. But while the S&P 500 has enjoyed a rally in the double digit percentage terms, Wal-Mart Stores Inc. just recently started to play catch-up again.
From the April 2012 lows up to the October 2012 highs, the stock retraced 50% by the time the November lows (near $67.50) were reached. From there the stock entered choppy waters as it more or less retested the November lows two more times. In other words, the 50% Fibonacci retracement level has now held as support held three times. The most recent bounce near this support area came in the middle of February, which led to a strong bounce that pushed the stock up to an important resistance level near $72. The first signs of ensuing relative strength in the stock came in late January as the stock bounced off the support level the second time and by doing so broke the downtrend from October.
Click to Enlarge A little closer-up on the chart, the resistance area around $72 is more visible. Last Wednesday the stock managed to overcome a weak closing session from February 21, which simultaneously pushed the stock past its 100 day simple moving average (blue line). This moving average has held well as support/resistance in the recent past, thus a break above it may be considered bullish at the margin. While I already think the current setup is bullish enough to consider a long-side swing trade, a final confirmation of a push past $72 would likely increase the probability of a successful trade further. After a breakout past $72 the stock should have a good 5% of upside for the time being, which would take the stock well into the mid $70s.