Why This Expert Loves Wal-Mart...In 2 Charts

Market Technician and Eagle Bay Capital founder JC Parets tracks the movement and performance of the stocks in the Dow 30, looking into the companies every week.

He recently discussed Wal-Mart Stores, Inc. (NYSE: WMT).

Weekly Chart

Wal-Mart was a stock Eagle Bay loved on a breakout above the consolidation (seen above) since 2013. The stock got there in the fourth quarter last year and the firm’s price targets were hit rather quickly, close to $87, right around Thanksgiving.

Since that moment, prices have fallen considerably, back to the original breakout level from 6 months ago. This week, “prices broke out above the downtrend line from the January highs” and Eagle Bay wants to be buying aggressively on this breakout.

“The risk is very well defined as we only want to be long above the downtrend line with targets 10% above current levels,” they explain.

Daily Chart

Short-term, Parets really likes the risk/reward profile for Wal-Mart. In the Fall, the stock got that monster breakout that Eagle Bay had been hoping for. Now, the 200-day moving average is upward sloping.

The firm’s target was reached in late November, just above $87, which represented the 161.8 percent Fibonacci extension from the consolidation of the past year. The experts only wanted to be buyers again “down towards the 200 day moving average and the highs from late 2013, but only above it.”

“We were unable to hold those levels and now momentum has fallen into a bearish range hitting oversold conditions on this correction,” they explain. 

“We only want to be long above that with a target back towards 87."