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Trade of the Day: Wal-Mart (WMT)

The S&P has made progress off of its February lows, but not as much as it did off of the September lows

The first two months of the year are now in the books, and it’s been pretty rotten all around for the stock market. The S&P 500 is down 5.5%, the Dow is down 5.2%, the Russell 2000 is down 9%, and the Nasdaq 100 is down 8.5%. The S&P 400 mid-caps are actually faring the best, only down 4.6%.

February itself ended flat, but that was pretty exciting since it came by anything but a straight line. The stock market fell 3.9% over the first half of the month, then rallied 5.6% in the second half. You’d like to say “bravo,” but it would be half-hearted at best.

Now comes March, which has been one of the better months of the year for the stock market over the past 100 years, as the centenarians could attest. In the past century, the Dow has averaged a gain of 0.5% in March, according to Bespoke Investment Group analysts, with positive returns 60% of the time.

During the past 50 years, the Dow has averaged an even stronger gain of 1.1% in March, with positive returns 68% of the time. And over the last 20 years, the Dow has averaged a gain of 1.4% in March, with positive returns 14 of 20 times (70%).

Bespoke notes that, while March has historically been a strong month for stock market bulls, April is actually the strongest. That suggests that the upcoming two-month period from March to April is historically one of the best times to be invested. In fact, over the last 50 years, it has been the best two-month period to be invested, according to the Bespoke analysts.

Below is a chart showing the S&P 500’s average two-month change over the last 50 years, and you can see that the March to April gain of 2.7% ranks best, just ahead of the 2.6% average gain seen during the two-month November to December period.

stock market

Bespoke also looked at how the March to April period looks during years when the S&P 500 is down over the first two months of the year, as it is this year. The analysts discovered that the stock market’s change over the first two months of the year had no real impact on its change from March to April. In years when the benchmark index was up over the first two months of the year, the March to April average change is 2.7%, while it’s just a hair lower — at a 2.6% gain — in years when the S&P was down over the first two months.

The bottom line is that March and April are two months when, seasonally, stocks have a better-than-even chance of regaining traction and getting back at least to the flat line for the year. If they cannot take advantage of the seasonal headwinds, then the rest of the year could be even rockier.

For now, I have my Trader’s Advantage members equally positioned in bullish and bearish trades. Here’s a long idea I want to share with you.

Wal-Mart (WMT) is the country’s largest conventional, brick-and-mortar retailer. Earnings announced in January were pretty lousy, mostly because the company purposefully lifted the cost of its employees by raising the minimum wage. It also announced the closing of many stores to make operations more efficient.

WMT stock is cheap by almost every measure, and has been gathering some momentum. WMT was featured in a very positive light in a Barron’s article on Saturday. Shares bucked the weak stock market by rising 0.3%.It appears to be rounding up out of a saucer-like formation at a time when cash flow is prized by investors.

I recommend buying WMT up to $68.05 limit.

Set up to sell all at my target of $72.50 and set a stop loss at $64.60 limit, good till canceled.

wmt

Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Follow him on Twitter for his latest take on markets and innovation.


Article printed from InvestorPlace Media, https://investorplace.com/2016/03/walmart-wmt-stock-market/.

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