Working Money magazine.  The investors' magazine. Advantage



Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?



Walmart: Guaranteed Lower Prices?

07/01/05 04:19:08 PM
by Gary Grosschadl

Since peaking in 2000, Walmart share prices have drifted sideways, but a pattern break has recently occurred.

Security:   WMT (NYSE)
Position:   Sell

This weekly chart shows a large symmetrical triangle that has broken to the downside and now may be testing that breakout point. These triangles are often considered to have a neutral bias until they break in either direction. They can also be considered continuation patterns, eventually moving in the direction of the previous trend. If this is to be a continuation pattern, since the previous trend was up, another upleg can be expected. However, the downside break hints otherwise.

Normally, when a pattern breaks, there should be a confirming surge in volume. In this case, there was a big volume spike, but it actually occurred two weeks before the breakdown, almost as if smart money anticipated the downside move. After a pattern break, there can be a retest of the breakdown point and this may be the case now. Should this test fail, expect another surge in volume as more traders anticipate further downside.

Long-term weekly chart of Walmart showing a pattern break.
Graphic provided by:
Several indicators also reflect bearish concerns, as can be seen in this chart. Note the crossover of the 50- and 200-day exponential moving averages (EMAs). This type of cross from these prominent moving averages often signals a more serious downleg developing. In addition, the MACD (moving average convergence/divergence) and the RSI (relative strength indicator) both show weakness under key levels. Furthermore, the CMF (Chaiken money flow indicator) clearly shows a shift to bearish power.

Two downside targets are suggested: first, a previous congestion area in the $30 vicinity, and second, the pattern-fulfillment target by measurement of the widest part of the triangle as applied to below the breakdown point--leading to $20. A move back inside the triangle negates this bearish outlook and could lead to a test of the upper trendline.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

Click here for more information about our publications!

Comments or Questions? Article Usefulness
5 (most useful)
1 (least useful)


S&C Subscription/Renewal

Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2020 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.