Wal-Mart Stock Technical Analysis (Breakouts and a Decline in WMT Stock)  

This is the second article (Part II) of our three part series: “Is Walmart Stock a Good Buy, Sell or Hold”. Check out Part I, which presents Walmart’s valuation and fundamental stock analysis.

3.     WMT Stock Technical Analysis

WMT is currently trading close to $77.31, which is $2.65 lower than the high end of its 52-week trading range of $64.8-$79.96. Just a day prior to Walmart announcing its Q1 earnings results, WMT stock closed (on May 15) at $79.86, only 10 cents shy of the stock’s 52-week high.

However, immediately after Walmart (WMT) released its Q1 earnings report, the stock saw a 1.7% decline, closing at $78.50 on May 16. This drop (highlighted by the red circle in the stock chart below) was attributed to less than stellar U.S. same-store sales.

WMT - Technicals

The selloff was apparent from the high share volume that traded in the immediate aftermath of the earnings announcement. For the 3 days prior to the announcement, May 13th-15th, an average of 8.6M shares changed hands. However, on May 16th that volume shot up to 12.1M, and the selloff continued on May 17th, with 10.7M shares crossing the tape.

Before May 16 (starting in late Feb 2013), WMT stock had been on a strong uptick, slashing through resistance at its 50, 100 and 200-day Simple Moving Average (SMA) price, and creating new 52-week highs in the process. From mid-April, up until the Q1 earnings came out, Wal-Mart stock started trading in a relatively flat range, which technical investors often associate with a pattern of consolidation prior to another breakout to the upside.

While the earnings announcement put a damper on that expectation, sending the shares tumbling downward, even breaking support briefly at its 50-day SMA (of $76.74), the decline seems to have stalled somewhat. The 1.7% decline of May 16th was followed by less steep declines, of 0.8%, 0.6%, and 0.1% over the subsequent 3 trading sessions. On the last trading session prior to this analysis, WMT stock closed 1.28% higher, ending the trading week at $77.31.

Based on these technical signs, however, it is too early to tell whether the decline has stymied, and if the stock is reversing its recent downtrend. Investors will need to watch how the stock behaves over the next several trading sessions.

Continue (final article, including Buy, Sell, Hold Recommendation): Negative and Favorable Catalysts Impacting Walmart (WMT) Stock