Must See Charts for Wal-Mart Reflect a Stock in a Trading Range, Not A Bull Market

NEW YORK (TheStreet) -- The largest retailer in the world and Dow component Wal-Mart (WMT) had a pre-holiday run-up in 2013 run-up in 2013 the led to a an all-time intraday high, then corrected in February on disappointing 2013 holiday season. Let's look at the charts to see whether the stock is still tradable. 

This stock has a trading range that can be traded, as the retailer is not a candidate for a "buy and hold" portfolio. Wal-Mart reports third quarter earnings before the opening bell on Thursday and the stock can see a jolt of volatility in reaction to positive or negative results and guidance.

The key trading levels for Wal-Mart establish the following trading strategies for the stock.

Investors should enter a "good 'til canceled" limit order to buy weakness to a key technical level at $72.95. To protect gains investors should consider employing a sell-stop below another key technical level at $77.45.

The stock has stalled several times above $79.00, then declined below $73.00 multiple times before rebounding again. This is the overall trading range at maintains in play.

Here's the daily chart for Wal-Mart that justifies this "buy and trade" strategy.

Courtesy of MetaStock Xenith

The daily chart for Wal-Mart ($79.01) shows the volatility over the last two years. Wal-Mart set an all-time intraday high at $81.37 on Dec. 4, 2013 then corrected by 11% falling below its 200-day simple moving average (green line) at $76.75 on Jan. 16 to an intraday low of $72.27 into Feb. 5.

This up and down volatility for 2014 has been within this broad trading range, which shows that the stock is not a "buy and hold" investment, and that investors can capture the up and down volatility using the suggested "buy and trade" strategy.

On May 15, Wal-Mart reported an earnings miss and the stock traded as low as $72.77 on Aug. 5. The decline from $79.98 on April 28 to the low was 9%.

There were three jolts of up and down volatility since Aug. 5. The first was a gain of 9% to as high as $79.37 into Oct. 10. Then there was a decline of 8.5% to as low as $72.61 on Oct. 16. Wal-Mart then rebounded 10% to as high as $80.13 into Nov. 11.

So far in 2014 there have been three opportunities to buy Wal-Mart shares below $73 and then to book a profits above $79. This clearly shows how "buy and trade" outperforms "buy and hold" for this stock.

Here's the weekly chart for Wal-Mart.

Courtesy of MetaStock Xenith

The weekly chart for Wal-Mart stays positive given a close this Friday above its key weekly moving average at $77.20. Given a close below the downside risk is to the 200-week simple moving average (green line) at $68.21.

The momentum in red along the bottom of the chart is rising above 20.00 at 66.61.

The daily and weekly charts thus show that investors can capture portions of the up and down volatility for the stock, and that Wal-Mart is not a "buy and hold" stock.

At the time of publication the author held no positions in any of the stocks mentioned.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WAL-MART STORES INC (WMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

You can view the full analysis from the report here: WMT Ratings Report

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