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“Wal” of Worry?

Lawrence Lewitinn
Talking Numbers
“Wal” of Worry?

Shares of Wal-Mart, the world’s largest retailer, are up almost 14% this year and it’s near its record highs. But will investors climb a “Wal” of worry after Thursday’s earnings release?

Analysts are expecting Wal-Mart to report revenues of $116.4 billion and earnings of $1.15 per share for the previous quarter after the close today. That means sales growth of 3% and earnings growth of 5% compared to the same time last year. As the stock is near its all-time highs, everyone is watching those numbers closely.

So, where will share prices go next?

“Wal-Mart’s one year chart shows the importance of its breakout above $77.50,” says Enis Taner, Global Macro Editor at RiskReversal.com and Talking Numbers contributor. Noting that $77.50 was previously a resistance level, “that level has held as support for the past month, and I expect the recent consolidation to act as a launching board to new highs after earnings,” he says.

“I think it sets up for a very nice base to push out to new highs.”

Richard Ross, Global Technical Strategist at Auerbach Grayson, isn’t so optimistic.

“I’m quite nervous about this stock,” he says. “They’ve already told us February store traffic is down, slowest February sales in seven years.”

This compares negatively to last year’s same-store sales growth for the retail giant. “This stock is vulnerable trading at an all-time high,” says Ross. “I’d be a seller at the all-time high.”

“The stock has not gone down on bad news but the stock has gone up on good news,” says a bullish Taner. “That tells me the buyers are more aggressive than the sellers. Plain and simple.”