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Asset Watch
Wednesday, February 27, 2025
It’s a risk reversal on Wall Street, as some of the most speculative assets have suffered mightily. Whether it’s Bitcoin, meme stocks, or hyper-growth technology names, the rampant upside momentum has become just as treacherous on the downside.
However, with some stocks less cyclical than others, could Walmart provide cover until the storm clouds dissipate?
Despite the recent earnings sell-off on lower-than-expected guidance, J.P. Morgan analyst Christopher Horvers reiterated his overweight rating and $122 price target.
He told clients that the dip is a “near-term buying opportunity” because investors overreacted to Walmart “taking its typically conservative [approach to] starting out the year.” As Walmart invests in its business, the U.S.’ largest retailer should achieve 6% U.S. and international operating margins in the next three years.
Add it all up, and he concluded, “We believe management is making these investment decisions from a position of strength and, ultimately, the profitability throttle is in their hands.”
While Walmart rallied on Feb. 25, you should keep a close eye on the $96 level. It’s near the December 2024 highs, and Walmart needs to hold above this area to reverse the recent breakdown and turn resistance back into support.
The 50-day moving average (the yellow line) is another key indicator, and Walmart recouped the level on Feb. 25. If it holds, it could be another sign that the correction is over, and Walmart could benefit from a safe-haven bid for less cyclical stocks.
The only concern is the 20-day MA (the blue line) has become resistance and could stall a potential rally. But, the December 2024 highs and the 50-day MA will likely prove more powerful if the current strength persists.
The best way to play Walmart is to wait for confirmation of a reversal. If Walmart closes and holds above $96 and the 50-day MA for a couple of days, a long position could be justified with an expected return to the previous all-time highs.
You could place a stop-loss order near $95 or $94 to maintain an exit strategy should Walmart catch down to the overall market.
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