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.
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.
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Source: Investor Place