Best Way to Trade Walmart as It Limps Toward Tuesday Earnings

Walmart falls to multiyear lows. Can earnings to be reported next Tuesday stop the stock from sliding?
By Richard Suttmeier ,

Walmart (WMT) - Get Report is the biggest loser among the 30 components of the Dow Jones Industrial Average I:DJI both year to date and for the fourth quarter to date. The big-box retailer is down 12.2% so far in the fourth quarter and down 33.7% year to date, solidly in bear-market territory. The Dow 30 has not had a good year, down 2.1% year to date, but up 7.1% so far in the fourth quarter.

Given the significant share price weakness for Walmart, judging whether to buy the stock before or after earnings will be a difficult. Investors should study the daily and weekly charts below, and employ a good-till-canceled limit order to buy the stock on weakness to a key level.

Analysts expect Walmart to earn 98 cents a share when it reports earnings before the opening bell on Tuesday, Nov. 17.

On Thursday, the retailer announced that its Black Friday deals would be offered both in stores and online. Online discounts will begin at 3:01 a.m. EDT Thanksgiving day, with stores opening at 6 p.m. that evening.

Walmart is one of Warren Buffett's top five holdings.

Here's the daily chart for Walmart.


Courtesy of MetaStock Xenith

The daily chart shows that Walmart had a close of $56.95 on Thursday, down 12.2% so far in the fourth quarter and down 33.7% year to date, It is deep into bear-market territory, 37.4% below the all-time high of $90.97 set on Jan. 13.

The downtrend accelerated on a negative reaction to earnings reported on Feb. 19, May 19 and Aug. 18. The stock slid down its 50-day simple moving average; this moving average fell below the 200-day simple moving average on May 11 in what's called a "death cross". This technical signal from the May 11 close of $78.10 indicates that lower prices are ahead. The multiyear intraday low of $56.77 was set on Nov. 2. The stock is well below its 50-day and 200-day simple moving averages of $61.97 and $73.12, respectively.

Here's the weekly chart for Walmart.


Courtesy of MetaStock Xenith

The weekly chart for Walmart is negative but oversold, with the stock below its key weekly moving average of $60.63 and well below its 200-week simple moving average of $73.68. The weekly momentum reading is projected to decline to 9.06 this week, down from 11.07 on Nov. 6. Both readings are oversold.

Momentum scales from 00.00 to 100.00, with a reading below 20.00 oversold and a reading above 80.00 overbought. A rising reading above 20.00 is positive, while a declining reading below 80.00 is negative. This study is shown in red along the bottom of the chart.

Note that the stock is below its precrash, 2008 high of $63.84 set in September 2008.

Investors looking to buy Walmart should place a good-till-canceled limit order to buy the stock if it drops to $54.19, which is a key level on technical charts until the end of November.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $76.13, which is a key level on technical charts until the end of 2015.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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