Thursday, January 17, 2013

Wal-Mart: Slow and Steady Wins the Race

Editor’s Note: Sam Collins will be on vacation�through June 25. Filling in for him�are two other top technical analysts, Chris Johnson and Jon Lewis.�

Wal-Mart Stores, Inc. (NYSE: WMT) — It’s hard to get excited about this stock. Speed of movement is not its strong suit. But patience can be rewarded, and now looks like a good time to jump aboard the behemoth.

The stock is on the march higher after hitting a six-month low in late May. In fact, the low was precisely at $50 (on May 25), which happened to be the site of peak put open interest. As we’ve said before, heavy put strikes often lend support.

But back to the matter at hand. The shares have advanced about 3% off the low, causing the 10-day moving average to cross above the 20-day. That’s a bullish sign of near-term strength. The last such bullish cross came amid a 6% rally in late February and early March.

A possible obstacle to this renewed rally is peak call open interest at the $52.50 strike. One advantage of WMT, though, is that its options are at $2.50 increments. So the next higher calls are at $55, which leaves more than 6% of room on the upside.

Like we said, nobody’s heart will race watching WMT’s daily price action. Like a huge supertanker, turning is a long process. But that’s OK if the stock is in the midst of an uptrend, as it is now.

Be patient, and take a modest gain. You could do a lot worse in the current market environment.

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