You say 2017 is the year of the retail-stock rut? Don't tell Walmart Stores Inc. (WMT) .
Walmart has rallied more than 31% since the start of the year, besting all the big market averages as it invests heavily in online sales and takes aim against the likes of Amazon.com (AMZN) . More importantly, it's working. Walmart's online revenues are up more than 60% as of the most recent quarter.
It's a 'buy the dips stock', but the dip isn't happening between now and earnings. Or it could accelerate to the uptrend if the surprise is positive. Either way, it makes sense to wait for the reaction. If it accelerates, it's buyable, if it drops, it makes sense to wait for a test of $82.
The latest news on that front is a push upmarket -- Walmart's website will add products from America's oldest department store chain, Lord & Taylor, in a bid to become a fashion destination.
Meanwhile, investors are gearing up for the next major update on Walmart's e-tail growth when the company reports third-quarter earnings on Thursday morning.
The good news is that you don't need to wait for those results to hit in order to figure out what's happening with Walmart. Instead, the price action is setting a very clear trajectory for this stock this fall. To figure out how to trade it, we're turning to the chart for a technical look:
The good news is that you don't need to be an expert technical trader to figure out what's happening in Walmart right now. Instead, the price action in this $272 billion retail behemoth is about as simple as it gets. Walmart has been in a clearly defined uptrend since back at the end of January, bouncing higher on every successive test of the bottom of its price channel.
The uptrending channel in Walmart is formed by a pair of parallel trend lines that have corralled 99% of this stock's price action stretching back over the last 10 months. So far, every test of the bottom of the channel at trend line support has provided investors with a low-risk buying opportunity before WMT's next up-leg.
While Walmart is currently at the other end of that spectrum, trading at all-time highs along the top of the price channel, the trend is clearly still in play right now -- and Walmart is a "buy the dips stock" this fall.
Relative strength, the side-indicator down at the bottom of Walmart's chart, adds some extra upside confidence to this trade right now. That's because our relative strength line has been in an uptrend since shares bottomed back in January, signaling that WMT is still outperforming the rest of the market. As long as that relative strength uptrend stays intact, this stock remains statistically more likely than not to outperform the rest of the S&P 500.
From a risk-management standpoint, it makes sense to wait for earnings to hit before jumping into Walmart right now. While earnings could be the catalyst that accelerates this stock's uptrend, an optimal buying opportunity comes on the next dip to around the $82 level.
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