A first-quarter beat was not enough for Walmart‘s stock to bounce. One trader sees positive signs in its technicals that could bring about a rebound instead.
“Walmart is at a critical spot,” said Frank Cappelleri, senior equity trader at Instinet, on CNBC’s “Trading Nation” on Wednesday.
Shares of the world’s largest retailer have seen a four-month rate of change of nearly negative 20 percent, he points out. That kind of decline is one so rare it’s only happened twice in the past 10 years – once in 2009 and again in 2015.
“The positive is that this led to bounces every time,” said Cappelleri.
Even as it has seen a sharp decline, its technicals still suggest some strength, Cappelleri added.
“Walmart is now getting close to a very impressive support line — $80, $82, it’s been able to bounce there over the last week or so and, coincidentally, we’re also near an uptrending support line – again near that 2015 low,” he said. “We like to have two areas of support together when we can as opposed to one. So, I think all those factors together could help Walmart bounce.”
Walmart’s stock has not broken below $80 a share since October of last year. It did hit a year-to-date low of $81.95 a share last Friday, but has since recovered to trade in Thursday’s session at just under $85.
Walmart’s stock depends on investors keeping the faith in its long-term strategy, said Boris Schlossberg, managing director of FX strategy at BK Asset Management. Its recent deal to buy Indian company Flipkart, a multibillion-dollar bet, will likely put pressure on earnings for the next few years.
“The bulls are arguing that this is a huge bet on the future (essentially kind of like when Google bought YouTube for way too much money) … and clearly Walmart is trying to make this whole strategy of clicks and bricks” work, Schlossberg told “Trading Nation” on Wednesday.
Any short-term strength will need to come from growth at its physical locations to make up for its investments in e-commerce, warns Schlossberg.
“If they can’t grow in their bricks-and-mortar business while waiting for e-commerce to take off, the market will lose patience ,” Schlossberg told CNBC in an email Thursday.
Walmart posted a 2.1 percent increase in same-store sales for its first quarter, while online sales in the U.S. rose 33 percent.