The first short sell signal was given on March 3th at 81,79 $ : the 21 EMA (brown line) crosses the 55 EMA (blue line) negatively.
Second short sell signal on March 24th at 81,97 $ : two small shooting star candlesticks blocked by the resistance of the 55 EMA (blue line).
Third short sell signal on April 13th at 79,25 $ : the price of the stock tumbles under the 233 EMA, now really confirming a downtrend.
The first 2 short sell signals were still a bit dangerous for a conservative investor/trader as the price was holding above the 233 EMA.
But even so, with a stop loss close above the EMA 55, or even better above the upper Bollinger Band , you would have stayed quietly in the short position, enjoying the whole fall, without interruption. Because of the stop loss the risk would have been small.
I always advise to handle the stop loss yourself manually, not to give the automatic order to your broker, in order to avoid negative surprises at an opening of the stock market or as all of a sudden some news causes phrenetic trading.
Later on, during July and a bit of August, when Wal-Mart tried a faint upward correction, the EMA 21 continued all the time under the EMA 55 and that's for me the best and most unemotional guide.
From the first short sell signal to today this method gave you all the tranquility of the world, while Wal-Mart was losing weight.
Fourth short sell signal on May 19th at 75,91 $ : Momentum accelerates with a downside gap and a new low, accompanied by high volume.
On the weekly chart we see a MACD sell signal on February 16th at 82,71 $.
This was not yet a signal to go short but it was time to take profit on long positions.
The 21 EMA is clearly under the 55 EMA and the price is firmly under the 233 EMA, underlying the downtrend. However there is one positive sign on this weekly chart : the 55 EMA keeps holding above the 233 EMA. Is some support around the corner ? Let's have a look at the monthly chart.
Price action is the most important thing.
At the start of the current year Wal-Mart marked a new high but finished the month of January lower than it started. This shooting star at 83,37 $ on the long term chart was a warning sign to take money off the table and cash in on profits from long positions.
Today we see how Wal-Mart is quickly approaching its 144 EMA (green line), currently at 58,76 $,
This coincides with the September 2008 high close at 58,43 $.
Former resistance zones become usually good support zones.
And there is more...
This is a quarterly chart with the price evolucion since 1989.
Here we see how Wal-Mart is already entering the long term support zone.
Future profits on short positions could be limited, at best.
Unless of course the negative news that Wal-Mart published yesterday continues building downside momentum and that more of the same is going to follow.
The company revealed the impact of higher wages and estimates that earnings will decrease 6 to 12% in fiscal 2017.
Tim Worstall, contributor to Forbes, published an interesting article .
For many analysts Wal-Mart is a benchmark of the American economy...
Or is that not true anymore ?
Let's focus on the price action and the charts. That way we avoid a lot of fear, hope and other feelings that could hurt our trades and investments.
Do you have a question ? Feel free to contact me on kiss4emm@gmail.com
English, French, Dutch, German or Spanish emails are welcome.
Arturo Botticelli,
kiss4emm
