Wal-Mart Stores (WMT) should be confident as we head into the holidays. The retailer will also be pursuing smaller stores and increasing its e-commerce. In fact, by "fiscal" 2014 the retailer is projecting $9 billion in online sales alone. In 2011 Walmart U.S. had total sales of about $260 billion, including e-commerce, accounting for roughly three-fifths of the company's business. Here are some of the things the store is working on to increase marketing:
- Featured commercials on layaway
- On ad-matching guarantees
- Price comparison on a basket of goods against rival retailers.
To counter rival business from online retailers like Amazon (AMZN), the company is testing same day deliveries in some U.S. regions.
Wal-Mart Stores looks like it has been consolidating for at least two and a half months with a very slight bullish lean. Even with the 'dip' in August I observe a bullish lean-but it is very slight. Supporting this slight lean is the RSI indicator. It has remained strong (above 50) while the stock has been consolidating. I would observe that this could mean a break out into bullish territory eventually. The MACD has also been supportive, just not as much as the RSI. Supporting a bullish breakout, it looks like the stock is also using the 50 day MA as support right now while the Bollinger Bands are contracting as tightly as possible. This usually points to a move in one direction or another and my observations would have me place my money with the bulls right now.
The Options Play
Since I believe the stock will rise and it is presently trading at 75.01, I am looking for a short term income play through the holiday season.
- Buy the December 2012 call with a strike of '75.00' (priced at $1.90)
- Sell the December 2012 call with a strike of '77.50' (priced at $0.85)
- Net Debit to Start: $1.05
- Maximum Profit: $1.45
- Maximum Risk: net debit
- Maximum Length of Trade: 3 months
Reasoning behind the Trade
- Holiday season is good the Walmart
- Momentum tends be leaning bullishly