Dow component Walmart Inc. (WMT) has increased from only 5.4% in the second quarter, well below the S&P 500 index is an impressive gain of 20%, making the retail giant noticeable lagging. That is quite a turnaround after a month of driven dynamic advance ended at its highest above $133 on 20 April. Intense distribution marked the retirement since that time, sustained by the speculators exit the first quarter COVID-19 vehicles of commerce.
However, bullish fundamentals have not changed as we enter the second half of the year 2020. Dozens of brick-and-mortar retail chains are likely to go bankrupt or be taken over by the suitors in the next 18 months because of the declining incomes due to the pandemic, will not be enough to pay the bills. In addition, the control of the epidemic in the south and South-western states may spread to the rest of the country in a second wave, forcing consumers to avoid shopping malls for many months.
Walmart and e-commerce rival Amazon.com, Inc. (AMZN), is expected to take a sizable market share as a result of these closures, retail, to stimulate gains in 2021 and beyond. Of course, Walmart is also a high level of e-commerce provider, managing a web site built to compete directly with Jeff Bezos’ brain of the child. The rapid growth of Walmart’s online operation had just allowed the company to “slow down” Jet.com the amount of $ 3.3 billion of acquisition used to boost its online sales by 2016.
Walmart stock has been sold to more than 10% since topping in April, but the shareholder exodus has been more severe, to the abandonment of the accumulation-distribution indicators 52-week low. However, it has been sitting on a strong support at the 200-day exponential moving average (EMA) for the past three weeks, while the relative strength of the cycles begin to cross, increasing the chances that the bulls will regain control of the ticker tape. This augurs well for new highs in the coming months.
Walmart Long-Term Chart (1996 – 2020)
A persistence of the correction is finished at a five-year low in 1996, leaving the place to an upward trend which reached a new summit, a year later. The momentum traders then jumped in, the carving of a powerful lead in at $70.25 on the last trading day of the 20th century. That marked the highest for the next 12 years, before downtick which has found support in the low $40 in March 2000. Subsequent drops tested this level successfully four times in 2003, but the prosecution has failed to stir buying interest, producing additional tests in 2005, 2006 and 2007.
The stock held up well through the economic collapse of 2008, setting the stage for a recovery that has finally closed the distance in the 1999 high in the fourth quarter of 2013. 2015 escape has added about 15 points before you turn the tail with the large retail trade sector, which was losing market share of e-commerce at a rapid pace. It fell to a four-year low in November, underlying Walmart’s decision to proceed with the Jet acquisition a few months later.
Walmart Short-Term Outlook
2017 breakout marked the beginning of a new era, which gives it a two paws up trend that continued in April 2020 all-time high. The sellers then took control, the dumping of shares on the long-term moving average support near $117 in mid-June. This level could act as a springboard in the coming weeks, lifting Walmart to return for the second quarter of the top. However, it will be necessary to rebuild lost sponsorship between now and then, perhaps in response to a resurgence of judgments and of the quarantine zones.
The monthly stochastic oscillator shows the stock in the first quarter of recovery, crossing in a cycle of selling in December 2019 and flip in a buy cycle just three months later. It is now crossing the middle panel, in an ideal position to attract renewed buying interest. In addition, the weekly oscillator has crossed over the oversold level, increasing the chances that the gap investors are willing to jump on board.
The Bottom Line
Walmart may have completed an intermediate level correction, and setting the stage for the third-quarter high upside.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.