Today I will investigate the case for Wal-Mart Stores Inc. (WMT-N). This will conclude Ken's assignment that included the analysis of Power Corp. of Canada (POW-T) published on Nov. 25.
This will be the third time since 2008 that I probe the charts for WMT. The last occasion was on July 23, 2012 when the shares were trading for $72.25. Clayton wanted to know if the advance that started in October of 2011 had more to give. The analysis indicated that the shares were meeting resistance at $73 and that he would be best served monitoring the trading pattern ahead of the release of Q2 results scheduled for release in August.
By the spring of 2013, WMT was trading in a range with support at $70 and resistance at $77.50. The stock oscillated in the range through November of 2014 when it broke above resistance and touched a 52-week high of $90.97 in January. But that was all the stock had to give.
A review of the charts will add depth to your evaluation of this investment.
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The outstanding pattern on the three-year chart is the steep downtrend line that indicates that sellers are in control of the market. Every attempt to move higher in 2015 has been met with selling pressure. Other warning signs worth noting include the breach of the 50-day moving average in February. In addition, the stock couldn't hold support along the 200-day moving average, and in May, a death cross formed. From there, WMT posted a continuing series of lower highs and lower lows with relentless resistance along the 50-day moving average. Sadly, the selling continued, taking the shares to a 52-week low of $56.30 in November of 2015.
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The six-month chart provides a close-up of the resistance along the 50-day moving average that will have to be overcome if there is any hope of a new up leg developing. Retailers were hoping that the lower price of gasoline would get consumers spending their savings at the pump. That has not been the case as many decided that the better course of action was to improve their balance sheets by increasing savings and paying down debt.
WMT might get a lift over the Christmas season as they push prices lower to increase competition in the market. However, on a technical basis there is little evidence that we can expect a trend reversal.
Make it a profitable day and happy capitalism!
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