Yesterday, the Walmart’s quarterly report inspired buyers, stocks raised by 3.7% with the S&P 500’s fall by 2.1%.
Let us figure out what exactly caused such a sharp rise and if there are perspectives for growth’s continuation.
Both revenue and profit turned to be better than forecasts four quarters in a row. Expectations of the company management for the current year are also optimistic enough: the growth of like-for-like sales by 3% (with market expectations of 2.8%), the growth of earning per share by 5-6% (with market expectations of 4.4%). The dividends’ rate has been raised for 49 years in a row; the company is one of the oldest dividend aristocrats in the US stock market.
An additional support to Walmart was given by the data of the US retail sales for January: the indicator grew by 3.8% after the fall in December by 2.5%. The negative result of December did not turn from a one-time case into a tendency; people are still ready to spend substantial money in stores.
In response to growth of inflation which has already reached 7.5%, Walmart raises prices for goods. As the largest representative of the Consumer Staples Select Sector, Walmart can afford growth of prices without a significant fall of sales: consumers are less likely to attend restaurants rather than buys of products in stores.
Technically, the price reached the minimum since March of 2021 at 132.65. The released report caused a surge in demand for stocks and the price rushed up. The momentum’s return of quotes above the important level of support of 135.5 indicates a false of the downward breakdown and signifies a serious intention of buyers. The targets of growth: the February maximum of 142 and the level of resistance of 146.5 which stopped waves of growth in November, December, and January.
Two following strategies for a buy of stocks can be considered:
1. A buy of Walmart for the current price. Take profit 1: 142. Take profit 2: 146.5. Stop loss : 135.5.
2. A buy of Walmart after the downward pullback to 135.5. Take profit: 142. Stop loss: 132.65.
As this years, financial markets show increased level of volatility, traders on their own could use Trailing stop instead of fixed Stop loss as the price moves upwards.