This Stock is Offering an Opportunity to Traders and Investors Alike

October 13, 2017
By

Shares of retailing giant Wal-Mart Stores Inc (NYSE:WMT) are higher by close to 25% for the year-to-date, and a good chunk of this performance (about 9%) came this week alone.

WMT stock is as a result now a tale of two time-frames; in the immediate to near-term my proprietary Vertical X Pro momentum indicator is flashing an overbought signal while into year-end, the stock still looks to have plenty of further upside.

For some perspective, it is key to understand that this week’s rally kicked off as Walmart earlier in the week announced $20 billion in stock buybacks and made remarks that it could see its online sales surge 40% in the coming fiscal year.

This ignited a rally that ultimately also forced larger institutional investors to commit some capital to, which in essence is part of the reason why I think WMT stock could have further upside into year-end after some consolidation in the near-term.

WMT Stock Charts

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

On the multiyear weekly chart, we see that this week’s rally came on the back of a multimonth consolidation period that visibly coiled up the stock. From a momentum perspective and as represented by the blue relative strength index (rsi) at the bottom of the chart more upside is likely as the rsi too is coiling up for a push higher.

What could be a next bigger upside target for WMT stock you ask? The January 2015 highs around the $90 mark and as highlighted by the blue bar on the chart are an obvious next attraction point.

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

Moving on to the daily chart, we see that as a result of this week’s steep rally, WMT stock has pierced out and above its 2016 and 2017 up-trending channel. Furthermore, the sharp rally has also sparked my proprietary Vertical X Pro momentum indicator to label the stock as immediate to near-term overbought. This now provides opportunity for quick traders and investors alike;

First, traders who are long WMT stock could now consider taking near-term profits in the stock.

Second, option traders could consider selling out-of-the-money call spreads for income using options with two or more months left to expiration (we use those options expires for risk management purposes — one of the more valuable lessons I learned over the past 20 years as a trader and investor).

Third, more aggressive traders could consider taking small short positions in the stock for a mean-reversion trade toward $83ish. Fourth, more medium term investors could remain long WMT stock for an upside target into year-end in the low $90s.

Like I said, WMT stock at this juncture truly is a tale of multiple time frames.

— Serge Berger

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Source: Investor Place



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