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Today’s Trading Edge: Walmart earnings beat and guidance drive shares higher

Posted by WorldWideMarkets . on Feb 21, 2017 7:28:51 PM

WMT FEB 21 2017.jpg

Wal-Mart Stores Inc. (WMT) shares rallied 3.0% in New York to $71.45 after reporting a strong fourth quarter.  Profit came in at $1.30 a share, one cent higher than the analysts’ estimates of $1.29.  Revenue rose 1.0% to $130.9 billion compared to a year ago, and was a strong beat of the eyed $1.30.5 billion estimate. 

CEO McMillon noted, " We're moving with speed to become more of a digital enterprise and better serve customers. We had a very solid fourth quarter with U.S. comp sales growth of 1.8%t and U.S. e-commerce GMV growth of 36%. Our international business is consistently delivering solid sales growth in constant currency, and Sam's Club posted its best comp sales growth of the year. I want to thank our talented associates for their work. We have more work to do, but I'm pleased with our progress.”

One of the key drivers for the rally was the strong guidance.  The e-commerce giant provided 2018 EPS guidance from $4.20 to $4.40 and Revenue to grow 3-4% year over.

Price action on the daily chart shows that bullish move is tentatively breaking out above both the 200-day SMA and long-term resistance. Since January 27th, price has steadily rallied and managed to continue to rally above the other two key SMA(s).  If we see further upside, price may find initial resistance from the $77 zone.  Price could form a bearish butterfly pattern.  Point D is with the 161.8% Fibonacci expansion level of the B to C move and the 127.2% Fibonacci expansion level of the X to A leg. If the pattern is invalidated and we continue to see bullishness, further upside may target the psychological $80 level. If bullish momentum stalls, major support will come from the 50-day SMA which currently trades around the $68.69 level. 

The Trade: Buy WMT at $70.25, with a stop loss at $68.25 and a take profit at $76.25.  The Risk/Reward Ratio is 1:3 

Topics: Stocks, US Stocks, US equities

 

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