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Michael Fowlkes' Analyst Insights

Options and ETF Analyst Writer
Michael Fowlkes
Author Bio


Wal-Mart to react to November retail sales report

Michael Fowlkes

12/9/2017 12:54 PM

What's Happening

Mega retailer Wal-Mart (WMT) has enjoyed a breakout year, with shares up 40.2% year to date as the retailer has emerged as the strongest competition to (AMZN). Retail sales for November will be released on December 14, and the report could push WMT shares higher to close out the year.

Technical Analysis

WMT was recently trading at $96.27, down $3.86 from its 12-month high and $30.99 above its 12-month low. Overall technical indicators for WMT are bullish and the stock is in a strong upward trend. The stock has recent support above $96.00, and recent resistance below $98.50. Of the 24 analysts who cover the stock, 10 rate it a “strong buy”, 13 rate it a “hold”, and one rates it a “strong sell”. GE gets a score of 64 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

Investor optimism is running high on WMT at this point. Not only has the company done a great job improving its customer experience in its stores, big investments in its online business have resulted in the company becoming a viable competitor against Amazon’s stranglehold of e-commerce. The holiday shopping season got off to a strong start, in particular with online sales. Wal-Mart reported impressive numbers for the all-important Black Friday weekend. November has become a huge month for retailers, since the wildly popular Black Friday and Cyber Monday sales events are a good barometer for what to expect through the remainder of the very important holiday shopping season. Based on the strong numbers from a number of retailers for their Black Friday weekend, the November retail report should be strong, and as long as no major disappointing news emerges in the report I expect WMT shares will manage to build on recent gains and trend higher into the new year.

Stock Only Trade

If you're looking to establish a long stock position in WMT, consider buying the stock under $96.25. Sell if it falls below $86.50 or take profits if it gets to $111.00.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a February 85/87.50 bull-put credit spread for a 20-cent credit. That's a potential 8.7% return (45.3% annualized*) and the stock would have to fall 8.9% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider a February 105/110 bear-call credit spread for a $0.30 credit. That's a potential 6.4% return (33.3% annualized*) and the stock would have to rise 9.4% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a January $100.00 covered call. Buy WMT shares (typically 100 shares, scale as appropriate), while selling the January $100.00 call for a debit of $95.40 per share. The trade has a target assigned return of 4.8%, and a target annualized return of 42.7% (for comparison purposes only). 


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