Importance Of Earnings:

Besides analyst rating changes (which can be ambiguous or “after the fact”), a company’s quarterly earnings report is the most important factor in determining the future course of its price action.

On many occasions, whether it be a big beat or miss, the highs and lows from the next trading sessions can often be used as price indicators until the company’s next earnings report.

Beat, Beat But Tepid Guidance

The headline numbers on an issue often overshadow future guidance. With respect to Walmart (WMT), the $0.07 EPS beat and more than $1 billion sales beat were undermined by tepid Q3 EPS and sales guidance. Investors may also have been spooked by U.S. sales growth reaching its weakest pace since 2020.

Post-Earnings Price Action

Eerily similar to its price action after Q1 results, the issue gapped lower and continued to move lower.

For the session, the issue declined by $10.46, or nearly 9%. That marked the lowest level for the issue since late November of last year.

On Friday, the issue breached Thursday’s intraday low of $102.85, falling to $102.15 before rebounding to close at $103.70. That price action sets up the “undercut the low and rally” scenario, where the second low can serve as a possible exit point if a long entry fails to hold.

Risk-Off Monday

Amid global and economic uncertainty, the market had morphed into a risk-off session as of 2 p.m. ET Monday. Typically, high-beta stocks, small caps, tech and speculative names are abandoned for issues perceived as safer.

For example, Sandisk Corp. (SNDK) is trading sharply lower, declining by 7% at the time this article is being written. On the other hand, the kingpin of value stocks, Berkshire Hathaway (BRK.B), is higher by 1.25%.

Moving Forward:

While today’s price action is somewhat encouraging, with the issue higher by nearly 2% versus a 0.03% decline in the S&P 500 cash index, it is too early to determine if a significant bottom has been reached in the issue.

However, if an investor has been waiting to attempt a long in the issue, they have a possible, identifiable exit point at the low of the move. A sustained move higher would be opposite of the way the issue reacted following its last earnings report.

Finding resistance is relatively easy at this juncture, with the post-earnings day high at $107. If and when that level is breached, there is a large gap that could potentially be filled to $113.99, the low from the day before earnings, along with that day’s closing price of $114.30.

At the time of publication, Joel Elconin had no position in Walmart.

Disclaimer: All content in this article is provided for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security, option or other financial instrument. The investments and strategies discussed may not be suitable for every reader. Readers should make their own independent decisions and consult a licensed financial professional before acting.