Walmart (WMT) reports earnings before the open on Thursday. Recent price action ahead of the report has defined a reinforced zone of support that could act as either a platform to power a move higher or a barrier to contain a pullback.
On the daily chart, the stock can be seen making a high in August then, moving lower and through its 50-day moving average before finding support in the $70.25 area. It bounced back up to the declining average, and after numerous failed attempts to break above it, gapped lower, through the support line and the 200-day moving average.
The stock spent all of October forming a rounded bottom, and in the process returned back up to the horizontal resistance line. The consolidation below this rim line resistance level formed the handle portion of a cup and handle pattern and defined a small uptrend line. Last week the stock price broke through the rim line of the pattern and the 50-day average, finishing just below a downtrend line drawn off the September highs.
A strong hammer candle formed in Monday's session, which closed above the downtrend line and on its high. The relative strength index and moving average convergence/divergence have crossed above their center lines, indications of the positive price momentum, and the aroon indicator, designed to identify early shifts in trend, has made a positive green-over-red line crossover. Volume has improved this month and the accumulation/distribution line crossed above its signal average. Chaikin money flow is in positive territory. Money flow is supporting the recent breakout in the stock price.
The price action and the technical indications look good going into the Walmart earnings report, and barring a serious miss or very poor guidance, the zone of support outlined by the intersecting trend lines should contain any pullback and potentially be a long entry point.