• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

With Walmart's Miss, Aim for Target

I see this major retailer on the edge of a breakout.
By ED PONSI
Aug 05, 2022 | 11:00 AM EDT
Stocks quotes in this article: WMT, AMZN, M, BBY, TGT

Earlier this week, Walmart (WMT)  announced plans to lay off hundreds of corporate employees. Walmart said the move would "better position the company for a strong future."

Just last week, the world's largest retailer reduced its sales and profit forecasts. Walmart also discussed the need to cut prices as both food and fuel inflation have curbed consumer spending.

With the bad news already out, it seems there's little else that could surprise investors. The performance bar has been significantly lowered, and the negative outlook is now priced into the stock.

I'm a long-term holder of Walmart. I wish I could tell you that buying now makes sense. Unfortunately, the chart disagrees.

Charts by TradeStation

Walmart gapped lower on July 26, after cutting profit estimates (point A). That gap was filled by the end of last month.

Now that the gap has been filled, the stock has resumed its downward trajectory. I wouldn't be surprised if Walmart returns to the $120 area, where the stock found its footing on July 26 (point B). A larger gap from May remains unfilled (point C).

Walmart is a great company, but I'm disappointed in its execution. For example, whatever happened to Walmart Plus, the company's answer to Amazon (AMZN) Prime? At $98 per year, the service is nearly 30% cheaper than Prime. Despite this advantage, Walmart Plus has very little visibility and no buzz.

It's not a stretch to assume that Walmart's competitors are also having issues with consumer spending. However, some of them might have an edge in execution. That edge is likely to show up in the form of a superior chart.

Searching through the retail sector, I found more pretenders than contenders. Names like Macy's (M)  and Best Buy (BBY)  are lagging both the retail sector and the overall market.

One chart that stood out was Target (TGT) . The company faces many of the same challenges that Walmart faces, but Target has better technicals.

Over the past three months, Target has formed a large rounded bottom. That pattern projects the stock to the $190 area. Target has also traded above its 50-day moving average (blue) for over a week, after several months trapped below that indicator.

If Target does manage to reach $190, it'll probably continue climbing to $210 as it fills a massive gap (point A).

Target is scheduled to report earnings on Aug. 17. I'm not expecting a great report, but I believe much of the bad news is already reflected in the stock's price. I'm taking a long position in Target for a short-term trade.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Ponzi was long WMT and TGT.
TAGS: Investing | Stocks | Retail

More from Stocks

The Chasing Slows on Wall Street

James "Rev Shark" DePorre
Mar 24, 2023 4:34 PM EDT

After Deutsche Bank shakes up investors, market cools a bit, which might be a healthy development.

Stay Away From These Types of Stocks, They're Radioactive

Jim Collins
Mar 24, 2023 2:35 PM EDT

Here's what you're better off buying. I certainly have.

GE Looks Poised for a Pullback: How to Trade It Now

Bruce Kamich
Mar 24, 2023 1:45 PM EDT

The shares stopped short of my price targets.

It's Not Whether the Next Shoe Will Drop, But Where and When

Bret Jensen
Mar 24, 2023 11:30 AM EDT

A few months of anxiety likely lies ahead of us, and caution remains the watchword of the day.

The Good, Bad and Ugly: What's Happening and What Investors Need to Do

Stephen Guilfoyle
Mar 24, 2023 10:45 AM EDT

Right now I have more in cash, or equivalents, than in equities. Ever hear of a Wall Street guy saying that before?

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:56 PM EDT PETER TCHIR

    Very Cautious

    I am very cautious here. I don't like how the c...
  • 08:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How to Adjust Your Trading Style as Market Conditi...
  • 05:00 PM EDT CHRIS VERSACE

    AAP Podcast on the Fed Decision!

    Listen here!
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login