Trend-following has been the most profitable trading strategy since May but Wal-Mart Stores stock is too high for me to invest in the retail company. Wal-Mart is reporting its quarterly earnings today and shares price could print new all-time highs, above $76 mark. However there is so much room for retracement even back to $60 level that I think trading WMT stock long at this time is quite risky. Following the trend is usually one of my recommended stock trading strategies but depending on the setup, I might suggest waiting for a retracement to avoid buying high! Note that I’m not advising to look for a reversal in such a strong uptrend, rather than be patient enough to take advantage of the trend at the right time – and price.
Wal-Mart stock was trading inside a range for years, until the WMT stock price skyrocketed above the range’s resistance level. WMT stock has gained 25% this year printing new higher lows and highs in the daily stock graph. Since July though, MACD and RSI divergence indicated in the graph has signaled a likely short-term reversal before trend resumes. Yet when it comes to risk-aversion, trading against the trend has a lot of risks.
We can’t be sure if a price reversal will actually occur, let alone retrace down exactly to the previous resistance level. That would obviously be an ideal technical analysis setup and one of the most profitable ones. Should that happen, I will enter long at $60-65 range for position trading, as holding Wal-mart stock for many months is the most likely scenario. If earnings report will be good enough for a new bullish breakout, I would wait for even longer time. Buying WMT stock that high isn’t in my plans. At the same time I would avoid selling at this point, no matter the high price or any other additional reversal pattern that may be drawn in the following days. My strategy says to buy low during a well-established uptrend and I don’t consider $75 for a Wal-Mart share to be low enough.
Are you trading Wal-Mart stores stock today that the earnings report is up? Do you agree with my stock analysis, or you think that a new breakout is more likely than a retracement? Let me know in the comments below.