Walmart (NYSE:WMT) spent nearly 2 years in a range between 72 and 80 before breaking higher in November 2014. That move fizzled out at the end of the year and the stock started to pullback. It seemed as if that 2-year range did not exist on the move lower, pausing briefly at the bottom before extending lower. An 11-month down trend found support late in 2015 and bounced.
The bounce continued until it reached the bottom of that 2-year zone and the 200-week SMA. That arrested the move and it consolidated for a few weeks before reversing lower. The breakdown came back to retest the range in November 2016 before pulling back to a lower low. But since that January low, it has been moving higher. Another retest of the range resulted in a pullback to a higher low and then last week a move back into the range and to the 200-week SMA.
Entering the shortened week, it sits at resistance with the RSI on the edge of a move into the bullish zone and rising, and the MACD crossed up and moving to positive. An AB=CD pattern would look for a move up to 83.25, through the range on continuation. Before that there is resistance at 73.25 and 74.60 followed by 77.60 and 79.20 then 80.30 and 83.80. Support lower stands at 69.35 and 68. Short interest is low at 2.4%. The company is expected to report earnings next May 18th, and the stock goes ex-dividend May 10th.
Looking at the options chains, this week open interest is spread mainly below and biggest at the 71 strike. At-the-money (ATM) straddles suggest about a 90-cent range this week. For April monthly options there is very large open interest at the 70 Put strike and then smaller size at the 72.50 Call Strike. ATM straddles suggest a $1.45 range by expiry. Both of these give a downward bias. Moving out to the May chain shows biggest open interest at the 75 Call strike with the 70 and 72.50 Calls also big. The Put side is biggest at 70. ATM Straddles suggest a $3.30 move by this expiry.
- Trade Idea 1: Buy the stock on a move over 73.25 with a stop at 70.50.
- Trade Idea 2: Buy the stock on a move over 73.25 and add a 72.5/70 Put Spread (90 cents) for protection through earnings, selling a September 77.5 Covered Call (97 cents) to cover the cost.
- Trade Idea 3: Buy the May 72.5/75 Call Spread ($1.10) and sell the May 70 Put (72 cents) to fund it.
- Trade Idea 4: Buy the April 72.5 Calls (98 cents).
After reviewing more than 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday, which heading into the holiday-shortened Easter week, sees the equity markets still looking a bit vulnerable in the short run and stronger in the intermediate.
Elsewhere look for gold to consolidate in its uptrend while crude oil continues higher. The US Dollar Index looks better to the upside while US Treasuries remain in their consolidation range. The Shanghai Composite looks to continue to plod slowly higher and Emerging Markets also continue to look strong.
Volatility looks to remain at abnormally low levels keeping the wind at the back of the equity Index ETFs as they all consolidate. The SPY (NYSE:SPY) and IWM look more vulnerable than the QQQ on their daily charts. All look stronger on weekly charts with the IWM showing the strongest potential for an early move.
Use this information as you prepare for the coming week and trad’em well.