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Trading Walmart and Target: Buy or Sell on Earnings Reports?

Here's how the charts look following Walmart's earnings beat and Target's earnings miss.

It’s a huge week in earnings season, particularly as we hear from retail. 

While tech stocks garner a chunk of investors’ attention, retail plays a vital role in the markets.

Not only are the companies big — like Walmart  (WMT)  and Target  (TGT)  — but they provide unique insight into the current economic climate. Investors get a read on inventories, inflation and supply-chain efficiency.

They also get insight into consumer-spending behavior: whether they're pulling back or increasing their outlays and what they're buying -- discretionary vs. nondiscretionary items.

With earnings reports rolling in, we’re getting a better look at the U.S. economy. 

For instance, Walmart has twice warned about inflation and inventory woes, causing it to slash guidance in May when it last reported earnings and most recently in July.

The retailer recently said it expected this year’s profit to decline 11% to 13% vs. 2021. But the company just gently lifted that forecast, now calling for a 9% to 11% decline. Walmart also delivered an earnings and revenue beat and topped expectations for U.S. same-store sales.

For Target’s part, the update wasn’t as rosy. Despite in-line revenue results, the company badly missed on earnings, while also missing on U.S. same-store sales forecasts.

The difference? Walmart warned ahead of the quarter, lowering the bar, and is rallying as a result. 

Trading Walmart Stock on Earnings

Daily chart of Walmart stock.

Daily chart of Walmart stock.

The $135 level was key support throughout 2021, but Walmart stock blew through this level in May 2022. Until this week, this prior support zone had become current resistance.

Walmart was able to gap above this zone after this week’s earnings report. It also cleared the 200-day moving average and the 50% retracement. In other words, the move was significant.

While the shares are struggling for more upside momentum, we now have a road map to follow.

On the upside, a continued push higher puts $144 in play, which is the 61.8% retracement. Above that opens the door to the $150 to $152 zone, a big resistance level until earlier this year.

On the downside, keep an eye on the post-earnings low at $138.19. If Walmart stock breaks below this level, it means it’s trading below the 50% retracement and the 200-day moving average.

That opens the door to the monthly VWAP measure, which comes into play near the aforementioned $135 level. Just below that is the gap-fill level near $133.50.

Trading Target Stock on Earnings

Daily chart of Target stock.

Daily chart of Target stock.

Target stock has been trading higher with the overall market since bottoming in June. Today’s post-earnings dip is being bought, as shares find buyers at active support via the 10-day moving average.

Just below this measure is the $168 mark. Not only is that the 23.6% retracement from the 2022 low to the all-time high, but it’s been notable resistance since May.

As long as Target stock remains above this mark, the bulls remain in control.

If the shares break below $168 and the 21-day moving average, that opens the door down to the $155 level, where Target stock finds the 61.8% retracement of the current rally and the 50-day moving average.

On the upside, keep an eye on $183.89, the pre-earnings high from this week. If Target stock clears that level, it opens the door to $187.50, then $200 to $210. 

That latter zone has a lot of measures to take note of. They include the 50% retracement, the 200-day and 50-week moving averages, and the gap-fill level at $209.13.

Currently, my biggest focus is on $168 and whether that holds as support.