Over the last five sessions, the stock's massive breakdown back on Oct. 14 appears to have lost its momentum. For patient investors, this is a promising development. Walmart could be building up for a healthy rebound and should be considered a low-risk buy near current levels.
Back on Oct. 14, Walmart suffered a devastating downside reversal. Shares fell more than 10% that day after management offered a weak outlook for 2016. A solid eight-week base that had formed just above major support was completely wiped out in one quick selling wave. Walmart steadily drifted lower since then, but by early last week, the downside pressure began to ease. This selling exhaustion corresponds with a test of the stock's 10-month moving average near $57. A base here would be a very bullish turn for a stock that is currently off more than 36% from its 52-week high.
In the near term, Walmart investors should consider the stock a low-risk buy in the $58 to $57 area. A close below $56 would send a clear warning that a significant low may still be a ways off. If the stock can gain its footing near this key zone, a bullish moving average convergence/divergence will be in place. This could add strength to a rebound move.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long WMT.