Walmart, $WMT, started to move higher in October last year with a gap up. A second gap in November led to a consolidation before it shifted higher again, reaching a top in January. it pulled back from there and gapped down in February. The drop settled into a consolidation as it fell below the 200 day SMA and continued. Since June though the stock has started to show signs of a bottom and reversal. It has made a series of higher highs and higher lows and last week closed over the 100 day SMA for the first time since February.
Momentum is building as well. The RSI is rising in the bullish zone and at levels not seen since January, while the MACD ix also rising and has just crossed to positive. The Bollinger Bands® are opening to allow a move higher as well. There is resistance at 89 and 90.60 then 93.80 and 97 before 99.30 and a gap to fill to 102.25 then 105 and 110. Support lower sits at 87.50 and 86.40 then 85.25 and 82.50. Short interest is low at 2.6%. The stock starts to trade ex-dividend (2.4% yield) on August 9th, and the company is expected to report earnings on August 16th.
The July options chain shows the biggest open interest at the 85 strike on the put side. Open interest on the call side is much bigger and found at that 85 strike then 87.50 and biggest at 90. The August open interest is biggest on the put side at the 77.50 strike and at 90 on the call side. The September chain shows open interest spread from 75 to 90 on the put side and rising from 80 to a plateau from 90 to 95 on the call side before tailing to 105.
Trade Idea 1: Buy the stock on a move over 88.50 with a stop at 86.50.
Trade Idea 2: Buy the stock on a move over 88.50 and add an August 87.50/82.50 Put Spread ($1.60) while selling an August 92.50 Call (50 cents) to lower the cost.
Trade Idea 3: Buy a July 27 Expiry/August 90 Call Calendar (87 cents).
Trade Idea 4: Buy an August 82.50/90 bullish Risk Reversal (46 cents).
After reviewing over 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 July options expiration week sees there has been a shift in short term leadership in the equity markets back to the QQQ from the IWM with the SPY continuing to improve.
Elsewhere look for Gold to continue lower while Crude Oil consolidates in its uptrend. The US Dollar Index continues to pause in its uptrend while US Treasuries continue to move higher. The Shanghai Composite may be building a bottom after a long drop and Emerging Markets are showing signs of a possible reversal to the upside after their long drop.
Volatility looks to be back at extreme low levels and holding keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts all look strong on the longer timeframe with the QQQ leading the charge. On the shorter timeframe signs of a pause are showing in the IWM while the SPY and QQQ are continuing higher. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.