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Walmart Dips After Earnings - Here's When to Buy

Walmart stock is dipping on earnings. We want to buy the dip, but the question is when. The chart gives us hints.

Walmart  (WMT)  has proved a resilient retailer regardless of the economic situation.

-- A global pandemic that wreaks havoc worldwide? No problem. Walmart was deemed essential and perhaps did better than any of its investors could have expected.

-- A major shift in the way consumers buy online? No problem. Walmart adapted to the e-commerce landscape incredibly well.

The latter point was evident in the Bentonville, Ark., company’s fourth-quarter-earnings report, showing online sales rose 69% year over year. That easily outpaced the company’s overall sales growth of 7.3%. Total sales were $152.08 billion and easily beat Wall Street's expectations of $148.3 billion.

But earnings missed analysts’ expectations. Combine that with a somewhat tepid outlook for the year and a down day in the market, and it’s no surprise Walmart stock is down about 5% on Thursday.

For investors curious about when to buy the dip, a look at the chart tells.

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Trading Walmart Stock

Weekly chart of Walmart stock.

Weekly chart of Walmart stock.

Notice the bout of volatility in Walmart stock in first-quarter 2020.

Yes, that wave of volatility at that time was not unique to Walmart. But only a handful of stocks held up well and Walmart was one of them. 

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The retailer's shares quickly raced toward $135 and hit resistance, failing to break out over that zone until August. That former resistance zone then acted as support in September.

More recently, Walmart stock has been putting in a series of lower highs. On its post-earnings dip, the shares are also breaking below the 10-week and 21-week moving averages as they test back down into the two-times extension from the long-term range.

What now? Walmart has had a big run but just told us that this year would be a bit more mellow than the prior 12 months.

Perhaps we can use that commentary to allow the stock to deflate a bit, giving us a better buying opportunity.

Aggressive bulls will use the current dip as their opportunity and that’s perfectly fine. Others will want more downside.

Should we get it, I want to see Walmart test down into the 50-week moving average and the key $135 zone. This gives bulls a decent risk/reward balance.

On a further decline, the bulls should be excited about the opportunity to buy Walmart on a test of the 100-week moving average, which has been solid support over the years.

The bottom line: We want to be buyers of Walmart stock. The question is: When do we pull the trigger? 

The answer will be different depending on each investor's risk tolerance.  

More aggressive buyers will require only a shallow dip. More conservative ones will need a larger pullback.-