WMT: An Unexpected Stock Breaking to New Highs

Jun 6, 2008: 8:28 AM CST

With the backdrop of potential recession, record oil prices, credit crisis, and other negative news, retail giant Wal-Mart (WMT) not only has broken to new highs for 2008, but is pennies shy of a fresh 6-year high, ascending 26% for 2008 alone!

Let’s look at the charts to see what so many people have been missing:

Price began 2008 near $47 and closed yesterday at $60 per share.  While the broader stock market indexes are struggling to break-even for the year, Wal-Mart has soared to new lofty highs for the year, marking a stellar and impressive gain for such a steady, “Blue Chip” stable stock.

One would envision consumer spending being reduced by the myriad of bad economic news that many people cite, but Wal-Mart stock price either is rising ‘despite the wall of worry’ or in direct defiance of it.  Maybe we’re not as bad as so many people seem to think?

Nevertheless, the daily chart shows a powerful and sustained uptrend beginning at the first of the year, evidenced by price being above and supported by its rising 20 and 50 period moving averages – a pattern which continues to this day.

The monthly chart shows another impressive picture:

Price is pennies shy of the 2002 price high (which also occurred during unfavorable economic times.  If you notice, price plunged to lows via the September 11th attacks and actually never looked back since then throughout the remainder of 2001 and the start of 2002… before returning almost to the post-attack prices.

In this background of uncertain economic conditions, Wal-mart has again rallied strongly despite economic concerns.  It may be that a larger percentage of consumers flock to the discounts of Wal-Mart when economic times are difficult, which in turn boosts their stock through increased revenue.  After all, with the groceries, medicines, and cosmetics (and so much more) they offer, those would be considered consumer staples materials that we all must buy, despite economic conditions as they exist.

Looking back, after a similar (almost identical) rapid month-over-month rise, Wal-Mart fell just as much into the year 2002.

Will history repeat itself this time?

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