Walmart is having a good 2019 so far, up over 30% from the low at Christmas last year. It has been in a strong uptrend for the first 6 months of the with a significant retracement occurring recently between mid-July and mid-August. Look at the daily chart in figure 1.
The first leg up in this move was from point A to point B. That leg was retraced as far as the 0.618 level which was used as support for most of the month of March. Then it progressed all the way up to the 1.618 level at point C. From there it reversed and just missed prior resistance used at B before returning to nearly all-time highs. What are its options from here? As always, up, down, or sideways. Prior to the high at C, divergences occurred on both volume and MACD, shown in figure 1. These are both signs of trend exhaustion which may suggest that C is the end of the entire move up from A and a larger correction is on the way.
However, it may be that the divergences were signalling only the minor correction which may have already finished, rather than a major reversal into a downtrend. The price action since C has the potential to develop into a consolidation pattern like some type of triangle. If a pattern does develop, it will give a better idea of what will come next. An intrinsically bearish pattern like a descending triangle would, in conjunction with the divergences and 1.618 resistance, suggest that the entire upward move ended at C. An intrinsically bullish pattern, however, like a bullish flag would be in disagreement with the divergences and suggest a continuation of the uptrend is likely to extend beyond the high at C.
If a continuation does occur, it would probably form the 5th wave of an Elliott Impulse Wave as shown in figure 2.
The final thrust would be expected to extend somewhere into the grey box. Note that the 4th wave may not be over yet. The market could still come back down to complete the 4th wave and then continue upwards to create the 5th.
In summary, if the market breaks above the high at C to all-time highs around $115 there’s a good chance it will be in the final wave of the upward move. This could last for up to two months or more. A larger divergence will probably develop as the final wave progresses and, upon completion of the 5th wave, a larger correction will likely occur. If price can’t break above $115, there’s a good chance a consolidation pattern will occur. The type of pattern which forms will shed more light on the sentiment around these price highs, and will probably.
The most important levels to the upside is $115.50. A break above here will take the market to all-time highs and may reach resistance just above $122. The important level to the downside is $104 (the high at B). A break below here will probably lead to support at $100.50 or $97.