Walmart (NYSE:WMT) is off to a sluggish start for 2020 compared to last year’s barn-burner. Owners of Walmart stock are looking to next week’s earnings report as a catalyst to provide some much-needed momentum.
First off, for a company that calls consumer staples home and probably has a reputation for sleep-inducing, dull price movement, WMT stock has seen multiple double-digit corrections over the past decade. The ascent has been riddled with volatility. In 2015 we saw a 38% thrashing, and 2018 brought in twin whacks of 25% and 19%.
To prepare for the earnings event, let’s take a fresh look at the technicals to discover the trends and price levels that could be affected by the post-earnings fireworks.
Walmart Stock Charts
At present, WMT finds itself 10% off its record highs, which is officially correction territory. Given the various retreats we’ve seen during its multi-year boom, however, this type of pause is hardly concerning, at least for the long-term trend. The 200-week and 50-week moving averages are both pointing higher, and confirm the long-term trend is still up.
There is a bearish divergence in the RSI on the weekly time frame, which should give buyers pause. This underscores the need for earnings to shock some life back into Walmart stock.
This year’s drop pushed WMT below the 50-day moving average, but thus far, the 200-day is holding. On the bright side, both metrics provide easy lines in the sand for signals that we’re turning higher or lower. Rather than guessing the direction of Walmart’s next move, why not wait for a breach of either moving average to confirm? Until we breach $117.50 or $114, I see no reason to get involved here.
On the volume front, we have seen an uptick in distribution days surfacing over the past month. Buyers will want to see those go away to build confidence that the big boys are switching from net sellers to buyers.
Implied volatility has drifted to the upper end of its one-year range, both in response to its decline and the looming earnings report. Though it’s still a week away and expectations might change, right now the forecasted move between now and next Friday (21st) is $5.30. That translates into a move of 4.6%, which seems fair to high given historical precedent.
For volatility plays, I prefer selling March condors the day before earnings. If you’re a directional trader, then I’d wait until after the report and look for a break of the previously mentioned support and resistance zones to signal which way to bet.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!