One of the easiest trading calls to make recently has been to not bet on any sustained momentum in either direction. Just when it looks like the indices are close to some sort of significant technical breakout (or breakdown), there's a strong reversal. We have another example of this so far Thursday, with the Dow industrials leading a very strong bounce one day after seeing some of the worst selling in months.
Technology names are lagging a bit, but a rallying Walmart (WMT) is driving the DJIA higher, which is creating some broad positive sentiment. Thursday's market breadth is the inverse of Wednesday's poor showing, with better than three gainers for each loser so far.
However, the number of new 52-week highs is still depressed at just around 90. That shows just how much the average stock is down recently, and it seems at odds with the market's major indices (which aren't far from all-time highs).
As noted above, Walmart is the star this Thursday morning, rising as much as 11% to more than $100 a share after an impressive earnings beat. The retailer posted its best core U.S. growth in more than a decade, which is surprising given where we are in the economic cycle. Same-store sales grew 4.5% excluding fuel, which is also pretty amazing considering the retailer's mammoth base.
Walmart also boosted full-year 2018 guidance to $4.90 to $5.05 in earnings per share, up from a previous $4.75 to $5. The company is looking for around 10% EPS growth this year, followed by around 5% more in 2019.
WMT currently trades with an 18x trailing price-to-earnings ratio. That's no great bargain, but Thursday's upside earnings surprise helps to justify such a valuation.
Still, Walmart's gap-up open has already begun to invite some profit-taking. When a big-cap stock moves 10% higher, plenty of folks will take the gain and run, then look for a chance to reenter the stock later at lower levels.
Technically speaking, it's tough to justify chasing WMT at this point. The $100 price level was a convenient price target, but it's triggering some profit-taking now.
There isn't much support for the stock after the morning's big gap up, but I'd expect to see some accumulation as Walmart pulls back toward the $95 level. It's going to take a while after that for new support levels to form.
If you're interested in Walmart long-term, it would be prudent to be patient and watch for this. There's going to be some consolidation, and better opportunities for entry will develop. Overall, market conditions will determine the optimal levels for the stock.
Meanwhile, a couple of my recent dip-buys are working well on the broader market's bounce. For example, Sarepta (SRPT) is up very nicely on an insider buy by the CEO.