Shares of Dow component Wal-Mart Stores, Inc. (WMT) have cleared psychological resistance at $100 following a seven-week consolidation and could trade into the $107 to $110 price zone in the coming weeks. Speculation about stronger-than-expected holiday and online sale metrics have contributed to the latest buying spree in Wal-Mart stock, which follows November's high-volume breakout above 2014 resistance at $90.

Online sales have grown rapidly since the company's 2016 Jet.Com acquisition, while aggressive supermarket and food delivery initiatives may have forced rival Amazon.com, Inc. (AMZN) to acquire Whole Foods Market last summer. Indeed, the Arkansas-based retailer is well positioned to challenge the internet juggernaut for e-commerce supremacy in the coming years, even though Wal-Mart's current 4% market share can't compete with Amazon's massive 43% e-commerce footprint. (See also: Why Amazon's Biggest Threat May Be Wal-Mart.)

WMT Long-Term Chart (1993 – 2017)

 

A multi-year uptrend ended at $17 in 1993, just weeks after a two-for-one stock split. The stock lost ground for the next three years, carving a rounded basing pattern that found support in the lower teens. It turned higher and broke out in 1997, entering a powerful trend advance that continued into the last week of the old millennium, peaking at $70.25. That marked the highest high for the next 12 years, ahead of an orderly decline that ended near $40 in the fourth quarter of 2000.

The stock got stuck between the 1999 high and the 2000 low for more than a decade, testing range support five times into 2007 while failing four breakout attempts into 2008. It held up exceptionally well during the 2008 economic collapse, with many Wall Street analysts expecting the low-price leader to gain significant market share due to the rapid depletion of U.S. retirement accounts.

Price action narrowed into an 18-point band into 2011 and took off in a positive feedback loop, finally generating a 2012 breakout above 1999 resistance. However, that buying wave failed to gain traction, yielding a 2015 failure swing that dropped the stock to a four-year low in November. A secondary feedback loop then set into motion, lifting into the 2015 rally high in October 2017, ahead of a breakout that has now penetrated the triple digits. (For more, see: If You Had Invested in Walmart Right After Its IPO.)

WMT Short-Term Chart (2015 – 2017)

 

The stock bounced along support at the 1999 high for more than two years after the 2012 breakout and then surged higher, posting a new high at $90.97 in January 2015. Brick-and-mortar angst then hit the retail sector, triggering a major decline that continued into November's deep low in the mid-$50s. The stock bounced off that level into 2016, stalling at the prior century's high in July, and took off in a 2017 trend advance that is now gaining momentum.

Price action since 2015 has carved the outline of an incomplete Elliott five-wave advance, with the third wave starting in February 2017. More importantly, the current wave may unfold through a smaller-scale five-wave set, with October's potential continuation gap marking the rally's halfway point. If so, the current impulse might not end until the $107 to $110 price zone, where a fourth-wave pullback could unfold. Meanwhile, the long-term pattern measures to a potential upside target between $125 and $130.

On-balance volume (OBV) peaked in 2008 and turned sharply lower, while an accumulation phase starting in 2010 stalled below the prior high in 2012. Testing at that level into 2015 failed to generate a breakout, contributing to that year's 35-point decline. The indicator returned to 2012 resistance and broke out in November 2017 but still has not reached the 2008 peak. Even so, this bearish divergence can be safely ignored due to massive share buybacks in the last decade. (See also: Wal-Mart to See Best Year in 3 Decades: Susquehanna.)

The Bottom Line

Wal-Mart shares may have cleared psychological resistance at $100 and could now rally toward $110, ahead of a long-term upside target between $125 and $130. (For additional reading, check out: Wal-Mart Has Strong US Sales Amid Retail Turmoil.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.