Dow component Walmart Inc. (WMT) and other big-box department stores has made the headlines in the first quarter, with their stock prices zoom higher because of their commanding market share at a time retail, competitors are struggling to survive. These stocks have held their ground in mid-May, but the purchasing power has not managed to follow the price action, indicating that the smart money is now taking profits and/or the building of new short positions.
The accumulation of deficit, we also said that short-covering has propelled the majority of the group of the europe 2020 strategy to the upside rather than serious investors seeking long-term returns. That rocket fuel is no longer in play, these stocks are now riding the slow ascent of broad indices of reference, that could stop at any time. The loss of this floor could expose these issues to a rapid decrease of trapping, the end-of-the-party shareholders.
Walmart stock topped out at $110 in January 2018 and pulled back in the low $80 in May. Price action is held inside of these limits in June 2019 breakout which made little progress, rising to $125 in November. The stock sold for the first nine-month low near $100 in March and turned sharply higher, from the sculpture on the two rally waves, in April 20 all-time high of $133.38, before a decline that has settled over the 50-day exponential moving average (EMA).
The balance volume (OBV), the accumulation-distribution indicator tells a different story, as price action, a reversal in October 2019 after it reached the resistance at the January 2018 high. It tested this level in February, has dropped to a seven-month low, and reversed once more to the resistance on April 6, two weeks before the rally topped out. OBV has now dropped to the lowest since August 2019, when the stock was trading nearly 20 points less.
Costco Wholesale Corporation (COST) shares topped out at $245 in September 2018 and sold to $189 in the fourth quarter. A 2019 recovery of the wave has reached the state of the high in April, before a June of derivation that have posted impressive gains in February 2020 all-time high of $325.26. The stock then fell more than 50 points in five sessions, finding support at a seven-month low above $270. The subsequent rebound topped four days later in a point of the state of the top, producing volatile two-sided action, which settled about 15 points below resistance.
OBV reached a new high one day before the stock posted a record high level in February and rolled in a persistence of the distribution phase, which has carved out lower highs and lower lows in mid-May, despite the momentum of the price action and the increase-the research triangle. In turn, this bearish divergence suggests that the smart money was using the repetition of the purchase of the spike dump long positions or open new short sales.
Target Corporation (TGT) stock topped in the middle of$80 in 2015, held by a well-publicized data breach that exposed millions of customers ‘ accounts. Rally attempts in 2016 and 2018 failed, while the slight increase in July 2019 completed a multi-year cup and handle breakout which has posted an all-time high to $130.24 in the course of the last week of December. The stock then sold in a relatively simple corrective pattern, bottoming out near $90 at the beginning of the month of April.
The price action has recovered more than three-quarters of the correction of losses in the last six weeks, but OBV has barely budged, a bearish divergence. The Distribution began at the same time that the stock topped, indicating that shareholders are taking profits at a steady pace throughout the first quarter. Unfortunately, the rally has now reached a resistance at the .786 Fibonacci sell-off of the retracement level, setting up ideal conditions for a reversal and steep decline.
The Bottom Line
The big-box stores are trading near rally highs, but constant, of the distribution at the surface suggests that the smart money has been selling these upticks.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.