Wal-Mart Stores Inc (NYSE: WMT)

Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. It operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. The company operates discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, cash and carry stores, home improvement stores, specialty electronics stores, apparel stores, drug stores, convenience stores, and membership-only warehouse clubs; and retail Websites, such as walmart.com and samsclub.com, as well as mobile commerce applications.

Take a look at the 1-year chart of Wal-Mart (NYSE: WMT) with the added notations:

1-year chart of Wal-Mart (NYSE: WMT)

WMT had formed a relatively clear down-channel chart pattern over the past month. When it comes to channels, any (3) points can start the channel, but a 4th point or more confirms it. You can see that WMT has several points of channel resistance and support. Yesterday, the stock broke through its channel resistance.

The Tale of the Tape: WMT broke through the resistance of its down channel. A long trade could be entered on a pullback down near the prior channel resistance. A close back inside the channel could negate the expectation of higher prices.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT