Shares of Wal-Mart Stores Inc (NYSE:WMT) rallied more than 4% last week following the company’s fourth-quarter earnings report. WMT stock, which rallied meaningfully in 2016, is now as a result of last week’s rally back at a technically critical spot. A push and hold above the current technical juncture could mean extremely positive things for the stock in 2017.
For its fourth quarter, Walmart posted an 18% drop in profits year-over-year, but did gain on the top line. E-commerce sales rose nearly 30%, which was in good part due to its acquisition of Jet.com.
This brings me to an important point regarding the current battle in retail. While the shift from brick-and-mortar sales channels to online sales has been an obvious if not outright brutal trend over the past decade and a half, I believe we have reached a certain maturity in this trend where the next big winners in this game will have both a substantial online as well as a physical presence.
To be sure, online retailing giant Amazon.com, Inc. (NASDAQ:AMZN) last year started taking initial steps into a brick-and-mortar presence, and last year’s aforementioned acquisition of online retailer Jet.com by WMT is an example of brick-and-mortar retail investing further in its online presence.
While the introduction of drone package delivery and ever more efficient and innovative ways of online ordering is an unstoppable trend, a complete replacement of physical sales points is nearly unthinkable. The marginal winners in retail into the foreseeable future in my eye will come from a great cross selling strategy between online channels and physical locations.
As such, what I liked from Walmart’s latest quarterly report was the continuation of investment into e-commerce. If they can combine this with more innovation in their brick-and-mortar stores, it should pay big dividends going forward.
Last time I mused about WMT stock on Aug. 29, 2016, I said that shares had rallied too much too quickly and were due for a pause or pullback toward their 200-day simple moving average. A few weeks later, Walmart reached this price target.
WMT Stock Charts
On the multiyear weekly chart, we see that the August 2016 reaction highs in WMT stock coincided with shares’ 200-week simple moving average (red) as well as the purple-dotted horizontal, which over the past few year has acted as both support and resistance several times.
Last week’s rally in Walmart stock has once more pushed it back toward this area of former resistance.
While likely near-term overbought, should the stock manage to push and hold above the $74 area for a few days, it could ultimately open upside into the high $70s or low $80s as a first target.
On the daily chart, we see that last week’s post-earnings rally pushed WMT stock back above its intermediate-term moving averages and right past diagonal resistance.
The stock now has to content with horizontal resistance (blue box), which lines up with the reaction highs from last December. A push and hold above $72.50 could offer a near-term upside trade toward $74-$75.
WMT stock at the current juncture is very much a tale of two time frames. While the stock remains constructive in the near-term, it also might need a pause after the rally of the past four weeks.
However, from a multi-month perspective, Walmart stock looks poised to ultimately break into the high $70s or low $80s. This view could be expressed using the stock itself or a myriad of options strategies.
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