The retail sector is now carrying the earnings season flame as we’re seeing an increase in reports from the critical sector. This morning, Wal-Mart Stores Inc (NYSE:WMT) provided its quarterly results to the market. The better-than-expected report has shares of the largest retailer rallying ahead of the open this morning.
Today’s three big stock charts look at the recent price activity for WMT, Costco Wholesale Corporation (NASDAQ:COST) and Dollar General Corp. (NYSE:DG) as three bullish stocks that are ready to close the year out on a strong note.
Wal-Mart Stores Inc (WMT)
Walmart came out with better-then-expected earnings results as the company is benefiting from its online presence and it appears to be doing well in its competition with Amazon.com, Inc. (NASDAQ:AMZN). WMT stock is spiking higher this morning in early trading, which should be the beginning to another leg-up in the stock’s rally.
- Walmart shares saw strong performance in October as the stock rallied from $80 to $90 ahead of earnings. Now, with a positive report, WMT stock is set to break through $95 as the market continues to push capital into the retailer.
- From a technical perspective, we did see shares emerge from an overbought condition identified by its RSI readings. The short-term pullback over the last week took the stock out of this category and it opens room overhead for a rally.
- Believe it or not, short interest on WMT stock is relatively high with a short interest ratio above 6. This indicates that a short covering rally is likely to be triggered by the recent earnings news, which will add a catalyst to the next rally.
Costco Wholesale Corporation (COST)
COST shares continue their trek higher as the big box warehouse retailer has emerged from the technical bear market that it barely missed falling into earlier this year. The stock is trading back above its 10-month moving average, indicating that the longer-term outlook has improved.
Today, shares are offering traders a bullish opportunity according to the current chart.
- After breaking below the 200-day moving average in July, Costco shares are finally turning this trendline into support. The most recent pullback was defended by bullish traders, indicating that cash is being allocated to the stock on pullbacks.
- The 50-day moving average for COST stock is in the process of forming a “Golden Cross.” This pattern happens when the 50-day crosses above the 200-day, signaling a strengthening bullish trend. The last occurrence of this signal was February 2017, ahead of the move from $155 to $175.
- Our model targets some continued weakness for the shares with $165 acting as support. From there, COST stock will turn bullish again, with a targeted move of 10% or more.
Dollar General Corp. (DG)
Discounters are hit-and-miss on the scene right now, but DG is making bullish moves as traders continue to run toward the stock’s best-in-breed technicals and fundamentals.
The charts indicate relative strength leadership that is likely to continue through year-end.
- Dollar General stock has been trading in a range for the last month with an upward bias that is preparing to pressure the resistance level at $85. A break above this price will have technical traders increasing the buying volume on the stock.
- The 50-day moving average for DG stock is in place to continue providing support for the stock at the $80.50 price point and it is rising quickly. This will help pressure the break above $85.
- Like WMT, Dollar General has a relatively high level of short interest as the current short interest ratio for the stock is 6.6. This means that the $85-price-level is also considered a “Trigger Price” for a short covering rally in DG.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
