Walmart Inc. (NYSE: WMT) seems to be ready for an upmove according to its latest charts. Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores from the United States, headquartered in Bentonville, Arkansas.
Bullish Indications
#1 Double Bottom Pattern: As you can see from the daily chart below, the stock has been forming a double bottom pattern. This is marked in pink color. A double bottom pattern is a bullish reversal pattern, and a breakout from it indicates that the stock could move upwards. The stock currently looks poised for a breakout from the double bottom pattern.
WMT – Daily Chart
#2 Price Above MA: The price is currently above the 200-Day SMA. This shows that the bulls are still in control.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line. This indicates bullishness.
#4 Bullish MACD: The MACD line (light blue color) is currently above the MACD signal line (orange color), implying possible bullishness.
#5 Bullish RSI: The RSI is moving higher from oversold levels and is currently above 50. This indicates the strength of the current upmove.
#6 Flag Pattern: As you can see from the weekly chart, the stock was in a strong uptrend, after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked in the chart below in purple color. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case). The stock is also trading above its 50-week as well as 200-week SMA, indicating that the bulls are currently in control.
WMT – Weekly Chart
#7 Bullish Stoch: The %K line of the stochastic is above the %D line in the weekly chart as well, and is also moving up from oversold levels, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for WMT is above the breakout level of the double bottom pattern, at around $151.30. However, you can purchase half the intended quantity of shares of WMT above the near-term resistance level of $144.40.
TP: Our target prices are $160 and $170 in the next 2-6 months.
SL: To limit risk, place a stop loss at $135 (For entry near $144.40) and $146.00 (For entry near $151.30). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 6% to 18% in the next 2-6 months.
- Entry near $144.40: For a risk of $9.40, our target rewards are $15.60 and $25.60. This is a 1:2 and 1:3 risk-reward trade.
- Entry near $151.30: For a risk of $5.30, our target rewards are $8.70 and $18.70. This is a 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks with high volume from the flag pattern and double bottom pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
–Tara
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