Wal-Mart Stores Inc Stock Is About to Soar Much Higher

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WMT stock - Wal-Mart Stores Inc Stock Is About to Soar Much Higher

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Eyes up breakout seekers: Wal-Mart Stores Inc (NYSE:WMT) shares are coiled and ready to pop. Ever since WMT stock galloped higher following its mid-November earnings announcement, the company has been in base building mode.

But with construction workers departing the ubiquitous retailer in droves, it looks like their job is finished, and a new advance is about to begin.

The one-day post-earnings pop six weeks ago was an impressive feat. Walmart’s quarterly report dazzled the Street driving the WMT stock price higher by 11% on enormous volume. The jump was so large that WMT has been digesting the gains ever since. Pauses aren’t uncommon after such an outsized rip and, if anything, they’re healthy.

Indeed, the past few weeks of churn have allowed the stock to work through overbought conditions. Note how the 20-day moving average has caught up. And the 50-day isn’t far behind.

Source: OptionsAnalytix

Walmart’s ability to remain above these major moving averages is telling. Rather than suffering major profit-taking, WMT stock has simply needed some time to catch its breath before charging higher. And if recent price action is any indication, that charge is right around the corner. The $100-level is sitting atop the stock like a ceiling.

But cracks are beginning to spread as WMT stock knocks on it again and again. If nothing else, it provides a clean horizontal price level to trade against over the coming days.

The WMT Trade

While buying calls is tempting here, we’re going to deploy a call spread instead. The reward will be limited, but this strategy carries a higher probability of profit than merely buying calls. Enter the Feb $95/$100 call spread for $3.37. The initial debit represents the max risk and it will be forfeited if WMT stock falls below $95 by expiration.

The max reward is the spread width minus the debit, or $1.23, and it will be captured if Walmart shares sit above $100 by expiration.

By risking $3.37 to win $1.23, the spread offers a 36% return.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

For a free trial to the best trading community on the planet and Tyler’s current home, click here!


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/wal-mart-stores-inc-wmt-stock-soar-higher/.

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