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Must-See Charts: Wal-Mart, Macy's - 4436 views
By Jonas Elmerraji
Posted on Feb. 4, 2010
A rise in jobless claims threatens to hold the market down in this morning’s early trading -- yet another stumbling block for stocks as they try to shore up their footing following last week’s correction.
But while the markets teeter, technical opportunities abound in a handful of Wall Street’s biggest stocks. Every Thursday, Stockpickr analyzes the technicals for some of Wall Street’s highest-volume stocks and takes a look at how to trade them using technical analysis, which uses a stock’s price movements to determine where shares are headed in the future.
Technical charts are used every day by proprietary trading floors, the street's biggest financial firms and individual investors to get an edge on the market. And according to some sources, skilled technical traders can bank gains as much as 90% of the time.
With that in mind, here’s this week’s look at how some of the biggest names on Wall Street are trading technically.
Retail giant Wal-Mart (WMT) has been getting a little bit of added attention this week following a strong sales update yesterday and additional details on plans to pare down its Bentonville, Ark., home office staff by 300 in an effort to save costs. An even bigger deal for Wal-Mart will be earnings, slated for Feb. 18. With fourth-quarter numbers just two weeks away, they’re within grasp for the scores of analysts who are watching the company with anticipation.
Technically, Wal-Mart could turn into a very solid upside play if earnings prove to be enough of a catalyst. Shares of the company broke upward yesterday, making their way above the 50-day moving average -- a bullish sign for investors who are counting on the stock to make a material move. At present, the stock is sitting just below short-term resistance, which happens to be its 52-week high.
That close price ceiling poses the biggest block to an upside trade right now. But assuming that Wal-Mart’s earnings impress, the company should have no problem making it above the blue line. Wait for a close above that level before going long.
The picture is markedly less bullish for Macy’s (M). From a fundamental standpoint, weak retail sales have affected the store more than most as customers fled department stores in favor of retailers that offered a more substantive discount. While ultimately this should be a fleeting problem, right now it’s very real -- and it’s enough to keep many investors away for now.
In the fourth quarter of 2009, shares of Macy’s formed a bearish head-and-shoulders pattern that’s pushed shares down from more than $20 to just over $15. Since then, the stock’s been stuck in a downtrend that’s attracted quite a bit of downside volume. With resistance in the form of a descending 50-day moving average right now, the likelihood of the pattern to continue is strong -- particularly if we see the 50-day cross under the 200-day moving average.
If you’re considering betting against Macy’s in the short term, wait for a bounce off of the 50-day before taking a stake.
China National Offshore Oil (CEO), or Cnooc, is well-poised to capitalize on the continually increasing oil and natural gas needs of China. Despite the recession, it’s become clear that China’s seat as a resource-hungry manufacturing power is unlikely to change. It’s also become clear that additional resources and infrastructure are needed to maximize productivity and efficiency for the long term. Cnooc should continue to thrive under those conditions given the People’s Republic’s protectionist bent.
Shares of Cnooc have been getting ready for a perfect short-term upside play lately. Shares of the stock hit a major slide as the market corrected over the last two weeks, but a bounce off of support at the 200-day moving average was enough to prove to traders that this stock is willing to be obedient to the technicals. A break above the 50-day provides an even higher level of support, which should act as a springboard to higher ground.
With an upside price target right around $171 currently, the potential for a nice upside play is strong. Wait for two consecutive closes above the 50-day before considering going long.
To see this week’s trades in action, check out the High Volume Technicals portfolio on Stockpickr.
At the time of publication, author had no positions in stocks menteiond.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.
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