Walmart Offers Mixed Technical Signals

 | Jul 14, 2017 | 10:50 AM EDT
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Walmart Stores Inc. (WMT) made a quick turn to the upside at the end of January. Since early June WMT has gaped lower and recently has made two gaps to the upside. Let's look closer at this bipolar-like movement in the share price and see what it might foreshadow.

In this daily chart of WMT, below, we can we can see the late January low and the subsequent rally. Along the way higher there were a couple corrections, as in March and May. These were mild/shallow and look like buying opportunities in hindsight. The strength quickly turned to weakness in June, when WMT gaped below the cresting 50-day moving average line. The On-Balance-Volume (OBV) line made a January-March double bottom and rose until late May. When prices of WMT made a new high in early June the OBV line failed to match it and then the line weakened. On the plus side, as WMT made a lower low from June to July the momentum study made a higher low.

In this weekly bar chart of WMT, below, we can see that WMT is above the rising 40-week moving average line. The weekly OBV has performed differently or under-performed compared to the price action. The OBV line did improve from late 2015 to the middle of 2016 as the share price of WMT rallied. WMT declined from mid-2016 and so did the OBV line. The price of WMT has climbed to a new high around $80, but the OBV line has diverged with a much lower high. This divergence compared to the 2016 high is a potential problem.

In the bottom panel of the chart is the Moving Average Convergence Divergence (MACD) oscillator, which has crossed to the downside for a take-profits sell signal.

In this Point and Figure chart of WMT, below, we only focus on price changes. No gaps and no volume. WMT is in an uptrend and the potential upside price target measures to the $85 area.

Bottom line: Not every chart is a clear buy or a clear sell. I find bullish and bearish signals on WMT, so I don't have a strong recommendation at this point in time.

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