In spite of all the headlines that online rival Amazon.com Inc. (AMZN) - Get Reporthas been grabbing for beating out its brick-and-mortar retail rivals, Walmart has actually managed to put out some solid performance this year -- the stock is up more than 9% since January. But now might be time to take those gains off the table -- Walmart is starting to look "toppy."
Walmart has spent the summer months forming a head-and-shoulders top, a bearish reversal pattern that signals exhaustion among sellers. It's formed by two swing highs that top out at approximately the same level (the shoulders), separated by a higher high (the head). The sell signal comes on the violation of Walmart's neckline at the $75 level. Shares are within grabbing distance of that make-or-break level as I write.
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Price momentum, measured by 14-day RSI up at the top of Walmart's chart, adds an extra red flag to this setup. That's because Walmart's momentum gauge has made a series of lower highs at the same time it was forming its head-and-shoulders pattern, a bearish confirmation that buyers are losing control of shares. If Walmart materially violates $75 on a closing basis, look out below.
Walmart's shares rose 0.8% to $73.06 each early Wednesday afternoon.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.