Can Walmart Remain at New Highs Once It Reports Earnings?

Walmart will report earnings with heightened expectations now that the stock is sitting at new highs. Here's how the charts look for the stock ahead of the print.
Author:
Publish date:

Walmart  (WMT) - Get Report is bursting higher on Monday, up almost 2% ahead of its earnings report scheduled for Tuesday before the markets open.

Walmart has been among the haves of retail, rather than the have-nots. Amazon.com  (AMZN) - Get Report, Costco  (COST) - Get Report, Target  (TGT) - Get Report and a few others have also enjoyed some time in the sun.

Thanks to a combination of food items, essential goods and various categories for disposable income, Walmart and others have done well despite the coronavirus pandemic hitting the nation hard.

The last two times Walmart reported earnings this year, however, shares sank after the report. Despite those moves, it’s not stopping investors from being optimistic as Walmart stock hits new highs ahead of this week’s report.

Will the momentum be enough to keep shares up after the report?

Amazon and Costco are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN or COST? Learn more now.

Trading Walmart Stock

Daily chart of Walmart stock.

Daily chart of Walmart stock.

As highlighted on the chart, one can see that Walmart stock dipped in February and May after reporting earnings. Since then though, shares have come roaring back to life.

In July, Walmart stock traded up to the April highs before stalling out and retreating. Over the last few trading sessions, Walmart has regained its upside momentum. Shares reversed hard on Wednesday, rallying four straight sessions to new highs.

On a dip, bulls would love to see a gap-fill down toward prior resistance near $132. If this former level of resistance holds as support, it would represent a bullish development for longs.

If it fails as support, Walmart could be heading for a test of the 50-day moving average. Below that puts the 200-day moving average in play, a level that was support in June and July.

On a bullish post-earnings reaction, let’s see if shares can hit the 161.8% extension near $137. That extension is measured from the March low to the November high. The two-times range comes into play at $145.75.

Those that prefer to measure from the March low to the March high will find that the 161.8% extension doesn’t come into play until $142.35. In other words, let’s look to see how Walmart handles $137, with $142 to $145 in play above that.