Wal-Mart Stores, Inc. (NYSE:WMT) shares are actually bludgeoning the market, up 11% year-to-date versus a 1% loss for the S&P 500 and even better than the 4% gain for the broader consumer staples sector. This is notable outperformance out of Walmart stock, and it could continue to play out in coming months.
My advice: Active investors and traders could look to buy the dips in WMT stock and/or trade shares higher upon confirmed breakouts.
After years of relative weakness by value stocks versus growth stocks, the past few months have witnessed a change in this trend. As the air started coming out of some high-beta growth tech stocks such as Amazon.com, Inc. (NASDAQ:AMZN), some more defensively oriented stocks such as WMT began seeing a bid.
In the case of Walmart stock versus Amazon stock — which is a big hedge fund favorite, and traders are even often long AMZN while short WMT — this trend reversal has been clear. Walmart shares have been making a series of higher lows in recent months, while Amazon has been making a series of lower highs.
This brings me to an interesting longer-term chart: the ratio of WMT stock versus AMZN stock. Note that particularly over the past decade-and-a-half, Amazon has been a massive outperformer.
While the broader trend is clear, investors have a strong tendency to get too complacent in trends such as this one and forget that sharp counter-trend rallies can occur, like the one we are currently witnessing.
Traders and investors: Know thy time frames.
Walmart Stock Charts
When I last opined about WMT stock on Feb. 19, I pointed to the big multiyear area of support as marked by the blue horizontal that the stock had fallen to late last year. The rebound since has been notable and pushed the stock back into horizontal resistance (black line), which was former support.
Looking at the daily chart, however, we see that Walmart stock over the past month or so has been consolidating below this line of resistance and by doing so slowly pushing back above the stock’s red 200-day moving average.
As I wrote on Feb. 19:
“If Walmart stock can continue to hold the lows from February 18th and eventually give off a bullish reversal (i.e., a strong buying day), then ultimately it should be able to move back above the early February highs and past its 200-day MA and into the low $70s as a next upside target.”
Two trading days after I wrote this, WMT indeed completed a bullish reversal and has been slowly pushing higher again since.
Barring a strong bearish reversal day, Walmart stock remains on target to push higher into the low to mid-$70s in coming weeks or months.
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