Wal-Mart Stores Inc. (WMT) shares initially dropped almost 6% after providing disappointing same-store sales figures. In the fourth quarter, U.S. comparable store sales (excluding Sam’s Club) printed at 0.6%, lower than analyst consensus of 1.0% and significantly lower than 1.5% reading from same period last year.
For the fourth quarter, earnings per share came in at $1.49 earnings per share, three cents higher than the analyst estimate. Revenue missed with $129.7 billion, the forecast was eyed at $130.4 billion. The company also raised their dividend to 2% to $0.50 per share, but the focus fell heavily on the company cutting its sales forecast due to the strong U.S. dollar.
Price action on the WMT daily chart shows the initial drop may have found tentative support from both the 50-day SMA and a potential Gartley pattern. Point D is targeted with both the 200.0% Fibonacci expansion level of the B to C move and the 70.7% Fibonacci retracement level of the X to A leg. If valid, we could see price stabilize ahead of the $61.00 handle and rebound towards the $68 region.
If price invalidates this temporary bullish reversal and breaks below the $60 handle, deeper support may come from the 2015 low of $56.30.
The Trade: Buy WMT at $63.50, with a stop loss at $61.50 and a take profit at $67.50. The Risk/Reward Ratio is 1:2