Are Wal-Mart Shares Overbought at Current Levels? – TheTradersWire

Are Wal-Mart Shares Overbought at Current Levels?


Are Wal-Mart Shares Overbought at Current Levels?

By Justin Kuepper | November 17, 2017 — 10:30 AM EST

Wal-Mart Stores, Inc. (WMT​) shares soared more than 10% on Thursday after the company reported better-than-expected third quarter financial results. Revenue rose 4.2% to $123.2 billion – beating consensus estimates by $2.2 billion – and earnings per share of $1.00 beat consensus estimates by three cents per share. Comparable sales increased 2.7% during the quarter compared with consensus estimates calling for just a 1.9% gain.

The most significant developments were in the company’s e-commerce division. Digital sales increased 50%, and gross merchandise volume rose 54% during the quarter. Early analyst reactions have been favorable across the board, and investors are starting to see how the traditional retailer can compete against rising online threats like, Inc. (AMZN​). The fundamental case for Wal-Mart has certainly become a lot stronger. (See also: Wal-Mart Shares Jump on Strong U.S. Sales Growth.)

Technical chart showing the performance of Wal-Mart Stores, Inc. (WMT) stock

From a technical perspective, the stock broke through trendline and R1 resistance levels at $91.78 and R2 resistance levels at $96.25 to new all-time highs. The relative strength index (RSI​) moved into overbought territory with a reading of 81.31, but the moving average convergence divergence (MACD​) experienced a bullish crossover that could suggest a new uptrend. Overall, traders should maintain a bullish bias on the stock.

Traders should watch for some consolidation above R2 support at $96.25 before a further move higher as the RSI moderates to more neutral levels. A breakdown from these levels could lead the stock to retest R1 and trendline support at $91.87, but the favorable third quarter financial results suggest that R2 support should hold. Traders should maintain a bullish bias on Wal-Mart stock over the intermediate term and a neutral outlook over the short term due to consolidation. (For more, check out: Wal-Mart to See Best Year in 3 Decades: Susquehanna.)

Stock charts courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Fri, 17 Nov 2017 15:30:00 +0000

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