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On this pullback, I like WMT

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Not long ago I alerted traders that shares of Wal-Mart (NYSE:WMT) had broken above its bearish resistance line (longer-term down trend) and had given a triple-top buy signal at $52. The MARKET looks to have responded favorably to the consumer confidence numbers and with that out of the way, I'm looking at the recent little pullback in the stock as a buying opportunity. In today's "hot list" on PremierMarkets.com I thought the June$50 calls (WMTFJ) was a good way to play the stock long. The current bullish price objective using our vertical count technique indicates a potential bullish price objective of $61.

Wal-Mart Chart - $1 box

First sign of trouble for WMT would be a trade at $47. A trade at $49 is needed for the stock to reverse 3-boxes and the stock is currently trading $50.75 at the time of this writing. With the Retail Index (RLX.X) down 2% this morning the group looks a little scary for a bullish trader. I'm choosing the June call contracts to give the trade time to work. However, I am going to stop out of the calls if the stock trades $47. That would be a sell signal on the above chart and break the newly forming bullish support line (blue +). I would currently characterize this trade as a "strong stock on pullback" type of trade.

Jeff Bailey
Senior Market Technician

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