Wal-Mart WMT Bullishly Breaks Weekly Long-Term Triangle

This week has confirmed a bullish breakout in Wal-mart (WMT) stock prices from a 1-year weekly triangle formation starting in September, 2008.  Let’s take a look at this bullish price break on the weekly chart.

Officially, the triangle broke out in August 2009 with a strong bullish buy bar, but price floundered under the $52 level and stalled with dojis at the upper Bollinger Band in what could have resulted in a bear trap (which would have been confirmed if price fell under $47 per share – the lower triangle support trendline and 200 day SMA).

So, technically, this week actually “confirms” the bullish triangle breakout from August in that price has formed a higher high in August, higher low in October, and now higher high in November, sweeping price above the recent $62 resistance level and upper Bollinger Band.

A break above $54 (prior price resistance from March) could likely send price up to challenge the $56 to $58 level (prior resistance from the end of 2008), which would put price in a solid uptrend and odds in favor of even higher prices.

Two caveats:

Volume – like in the general market – is forming a negative divergence, or stated differently, volume does not appear to be ‘confirming’ or ‘supporting’ this bullish breakout with broad-based participation.  Watch that to see if volume picks up – or if price fails to rally as a result.

Momentum:  Though less important than volume, the 3/10 Momentum oscillator is forming a negative divergence and also is failing to confirm recent price highs.  On bullish price breakouts, it is much more desirable to see new momentum highs accompany new price highs … or else a non-confirmation sets in.

Still, this is a development that’s certainly worth watching.

Corey Rosenbloom, CMT
Afraid to Trade.com

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