Even in a bearish environment, there’s always a bull market somewhere. But for a stronger chance at ringing the register with less risk, a pairs trade in Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) buying WMT stock and shorting AMZN stock makes sense.

Let me explain.

As the broader market experienced a sobering and long overdue wake up call this past month, there were still some winners among the numerous losers for bullish investors. One glaring example is in retail giants Walmart and Amazon.

Walmart stock has tacked on roughly 6.5% for October, while AMZN stock has shed about 20%. Yet with looming trade tariffs in 2019 and god only knows what else, it’s hard to know how business conditions will play out for WMT stock and AMZN stock. That’s why a pairs trade makes sense in these retailers today.

Prime Purchase: WMT Stock  

As Wall Street takes a corrective step back from a historically frothy rally, a combination of value investing winning favor over growth, better-than-expected earnings and a more technically appealing price chart make Walmart stock a prime purchase today.

Technically and looking past Wednesday’s modest investor angst over Walmart’s ambitious $500 million plan for conquering India, the monthly price chart shows WMT stock is poised to continue its winning ways. Currently, shares are carving out a year-long corrective cup-shaped base which successfully tested its prior highs set in 2015. That’s bullish.

Now, with WMT stock breaking out from a well-constructed handle pattern, but pulling back into technical support on lighter volume, Walmart is a prime, lower-risk buy within a pairs trade.

My recommended strategy for WMT stock is to buy shares today and set a stop-loss of 8%. That’s slightly below the technical support offered from the handle formation and smartly minimizes risk if the pattern fails.

On the upside, WMT is in position to breakout of its cup base to fresh all-time highs in the coming weeks. And with a mid-November Q3 report nearby, there’s a potential catalyst capable of doing just that. A conservative measured move out of the pattern supports Walmart stock finding its way toward $135. That’s a return more than four times the size of the trade’s risk, and that’s why WMT is a prime buy today.

Prime Short: AMZN Stock

Don’t get me wrong, I’m guilty of using Amazon just like the next guy. From the ease of shopping for virtually anything from the comfort of my laptop or mobile phone to watching standout television shows and movies on Amazon Prime or reading a book on my Fire tablet, I’m definitely a buyer of what the technology giant is selling.

But as AMZN stock relates to being an attractive investment, let’s just say shares are not in the first inning of the game. While momentum appears to be picking up for WMT stock, Amazon has a more wobbly, growth-driven fundamental picture and an extended technical run that has given way to a knife-like gutting of shares. All of this sets AMZN stock up as a prime short.

AMZN Stock Monthly Chart

Our detailed monthly chart offers a sobering view of just how far Amazon stock has come over the past decade since the financial crisis. Equally important, all stocks do eventually correct on the price chart. Furthermore, go-go growth narratives such as AMZN can be exceptionally punishing when markets are weighed down with risk as they have been in recent weeks. So, let’s take a closer look at the price action in Amazon stock on a slighter time-frame.

Reviewing AMZN stock’s daily price chart, we can see shares cleanly broke 2018’s channel support in October and then failed at trend-line resistance out of a bear flag pattern. Most recently, Amazon shares collapsed below the 200-day simple moving average following weak sales and guidance which trumped better-than-expected profits for the third quarter.

AMZN Stock Daily Chart

At this week’s panicky lows, Amazon stock successfully tested a 50% retracement of this past year’s incredible rally in excess of 100%. The corrective low also marked a fairly common and healthy drop of 28% from its September all-time-high of $2,050.50. Normally, that’s exciting stuff for bullish AMZN stock investors. But, as stated earlier, the ball game for fans of Amazon isn’t in the early innings and I’m thinking October’s bottom is still ripe for failure.

The suggested strategy is to short AMZN stock and position as a bear. Similar to WMT stock, I’d use a stop-loss of 8% near $1,728 to exit a possible losing position. This plan of attack for short-sellers allows for a potential short-lived penetration of the long-term moving average. It also remains positioned for even larger profits in a stock still up roughly 35% in 2018 alone, and in a much trickier operating environment for growth. At the same time, if we’re wrong and Amazon stock pulls off a technical surprise such as a “V” bottom, by controlling risk to a manageable amount, the trader will be in much better shape to consider future opportunities as they emerge.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.