Walmart Shares Show Resilience Amid Trade Challenges
Despite significant exposure to China and Mexico, Dow giant Walmart trades just five points shy of its 2018 record high.
Walmart Inc. (WMT), a key Dow component, has demonstrated impressive resilience in recent weeks, weathering the storm of escalating trade tensions with China and Mexico. Given its extensive inventory sourcing from these countries, one might expect Walmart's stock to decline as the company faces pressure to increase prices or reduce profit margins unless new trade agreements emerge.
Nevertheless, investors appear to be banking on Walmart's reputation as a recession-resistant retailer. They anticipate that consumers, burdened by tariffs, will shift away from pricier competitors, boosting Walmart’s market share. This mirrors the 2008-2009 financial crisis, during which Walmart's stock dropped less than 30% despite widespread economic turmoil.
However, the current environment differs from the last decade’s bear market. Previously, Walmart maintained profitability partly due to China's rapid industrial growth, which enabled cost-effective manufacturing partnerships. Today, global supply chains are disrupted by rising populism, which prioritizes political agendas over corporate earnings.
WMT Long-Term Performance (1993 – 2019)
The stock experienced a historic uptrend capped at a split-adjusted $17 in 1993, followed by a rounded correction bottoming in the single digits by 1996. A rebound the next year triggered a breakout, tripling the share price over two years and peaking at $70.13 in 1999. This level held as a ceiling for 12 years, during which the stock traded within a range supported in the low $40s.
In September 2008, shares reached a six-year high near $65 before plunging to $46.25 in February 2009 amid global market declines. Support levels tested in 2010 and 2011 formed a triple bottom reversal, fueling a strong rally that revisited the 1999 peak by 2012. After a brief stall in the upper $70s, the stock surged to an all-time high of $109.98 in January 2018.
Over the past 17 months, price action has formed a broad symmetrical triangle, currently in its fourth wave rally phase. Such patterns typically complete five waves before a breakout or breakdown, suggesting Walmart’s trading range will persist in the near term. Additionally, the monthly stochastic oscillator entered a buy cycle in July 2018 and recently reached overbought territory, indicating potential for further gains.
WMT Short-Term Trend (2015 – 2019)
Applying a Fibonacci retracement to the 2015-2018 uptrend reveals that the December 2018 low coincided with the 50% retracement level. At that point, the stock was deeply oversold, supporting the ongoing 2019 rally. This upward momentum has reached intermediate resistance at the November 2018 peak and may have broken above the descending trendline, potentially accelerating gains toward the 2018 high.
The on-balance volume (OBV) indicator, which tracks accumulation and distribution, ended a strong buying phase in June 2018 and entered a distribution phase possibly concluding in December. Since April 2019, OBV has stabilized, reflecting equilibrium between buyers and sellers. A significant catalyst will be needed to break this stalemate: positive developments could propel the stock to its 2018 peak, while negative news might push it back to the 2018 low.
Conclusion
Walmart’s stock remains sturdy despite trade-related obstacles, but technical indicators suggest a balance between bullish and bearish forces rather than a strong surge in buying activity.
Disclosure: At the time of publication, the author did not hold any positions in the securities mentioned.
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