The latest earnings release from Walmart (NYSE:WMT) delivered instant profits on a silver platter. In one of it’s largest up-gaps ever, WMT stock pole-vaulted 11% overnight.
In response, shareholders weren’t shy in their ringing of the register. WMT stock is now down four straight days, leaving many spectators to wonder if the gap zone will continue to fill … or if buyers will finally step in to arrest the decline.
I’m betting on the latter, and I will show you how to profit from it.
My willingness to wager on WMT bulls is based on two factors. First, last week’s jump to $100 landed Walmart’s stock back above every major moving average. With a daily uptrend now firmly established, I suspect buyers rise to the occasion and defend their recently claimed turf.
Whether support forms at $95 or $94 (or lower) remains to be seen, but I suggest being on the lookout for a pivot low to form in the next few days.
The second factor bolstering my bullishness is earnings-driven sentiment. When a company as large as Walmart so thoroughly crushes earnings that it’s rewarded with an 11% overnight gap, it signals a massive sentiment shift.
It’s the type of shift that typically has staying power and continues to support the stock for the remainder of the quarter.
While some profit-taking after such a quick gift is understandable, I would be surprised if traders allow WMT to give back the entire gain over the coming days.
Throw it all together, and I think this WMT stock dip is providing an exciting entry point.
The WMT Stock Trade
To provide ample room for WalMart to find its footing in the coming days, I like the idea of scaling in to bull put spreads here. Selling the Sept $92.50/$90 bull put should do the trick.
Consider entering a partial position now for 31 cents and adding more if the spread rises toward 50 cents.
The max reward is limited to the initial credit and will be captured if WMT sits above $92.50 at expiration.
As of this writing, Tyler Craig did not hold a bullish position in WMT. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
