Walmart (NYSE:WMT) scored an upgrade from Deutsche Bank (NYSE:DB) yesterday. In a research note, analyst Paul Trussell raised the firm’s rating from “hold” to “buy” citing growth in the retailer’s online grocery business. Walmart stock ramped 2.5% yesterday on heavy volume and added some early this morning, though the price has since pulled back.
This week’s rally in WMT staved off a breakdown below its 50-day moving average. And with that, the trend is now back to pointing higher. Some give back following August’s monster earnings gap was anticipated. But with this week’s jump, it seems the slide is done, and Walmart stock is now ready to trend higher.
Consider $100 and $105 the next two upside targets. The century mark is the spot that initially halted the earnings gap. A retest in the coming weeks is inevitable if the rally continues.
Aside from the upgrade, Walmart also sits in a sweet spot now from a sector perspective. With growth stocks taking it on the chin this week, defensive sectors like Consumer Staples are currently in vogue. Safety seekers should continue flocking to Walmart to hide from the storm.
Walmart Stock Options Trade
Since troughing in late August, implied volatility has been climbing steadily. Yesterday’s stock rally was enough to lift implied volatility into “high” territory. At 52%, the IV rank suggests premium sellers are now being rewarded handsomely.
If you think WMT will remain strong, selling bull puts provides an opportunity for high-probability cash flow. Sell the Nov $95/$92.50 bull put for 75 cents. The potential profit of 75 cents will be yours to keep if the stock sits above $95 at expiration. The risk is $1.75 and will be forfeited if Walmart stock falls below $92.50.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.