After a very strong start to 2016 where shares of Wal-Mart Stores, Inc. (NYSE:WMT) outperformed most stocks and asset classes, Walmart stock took a bit of a setback on Thursday following the company’s latest earnings report.
WMT’s report card for Q4 was worse than expected, as was the company’s outlook. The company’s report card for the fourth quarter was worse than expected as was the company’s outlook. Nevertheless, Walmart stock continued to hold most lines of technical support and thus remains a candidate to buy on the dip and confirmed bullish reversals.
The quick numbers:
- WMT earnings came to $1.43 per share, below estimates for $1.46.
- Sales came to $129.7 billion, which also fell below estimates of $131 billion.
It seemed that Walmart’s initiatives from last year — including a renewed focus on e-commerce, store upgrades and employee wage increases — have not made their way to better sales and earnings. (Or at least not better enough.) WMT then also cut its fiscal year sales outlook to flat, which was worse than the previous guidance for sales growth of 3% to 4%.
And yet, despite these disappointing big-picture numbers, Walmart stock fell only 3% on Thursday, which in and of itself might be telling.
Walmart Stock Charts
Looking at the multiyear picture of WMT, we see that when it fell into horizontal support (blue line) last November/December, it began to bounce. This bounce off the November lows into the January highs measured approximately 20% — nothing to snark at in percentage terms.
When I last opined about Walmart stock on Dec. 23, I said that if the stock could overcome the $61 area, it could be good for a fairly swift lift into the high $60s. That’s exactly what transpired, and that’s also where WMT shares began to lose steam.
As a result of the move off the November lows, Walmart also finally broke out of the severe 2015 downsloping channel (black parallels), the upper end of which should now ideally hold as support for the medium-term.
On the daily chart, we see that the high $60s — where WMT stock recently found resistance — was a technical confluence resistance zone. The zone was made up of resistance by the red 200-day moving average, horizontal resistance and near-term overbought readings from the momentum oscillators.
Thursday’s post-earnings selling in the stock pushed it back below its near-term moving averages (8- and 21-day) but held Walmart stock above trend support from the November 2015 bottom as well as above its 50-day MA, which served as support at a higher low in January.
If Walmart stock can continue to hold Thursday’s lows 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.
Until a bullish reversal takes place, however, patience is of the essence.
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