Retail giant Walmart Inc. (WMT) extended its winning streak with its seventh consecutive beat of earnings per share estimates in its report released on Nov. 14. The stock set its all-time intraday high that day at $125.38 but then closed below its quarterly and monthly pivots at $123.15 and $121.04, respectively. Weakness has held the 50-day simple moving average, which ended last week at $118.63. The weekly chart is showing a warning and will be negative if the stock ends November below its five-week modified moving average at $118.29.

Walmart stock, which is a component of the Dow Jones Industrial Average, has a gain of 28.1% year to date and is in bull market territory at 39.1% above its Dec. 24 low of $85.78. The stock is 4.8% below its Nov. 14 high of $125.38. Fundamentally, the stock is not cheap, as its P/E ratio is 24.12 with a dividend yield of 1.77%, according to Macrotrends.

Walmart earnings beat estimates, and its holiday outlook was positive, but sales fell slightly versus estimates. Online sales are on the rise thanks to grocery items, but the costs of online commerce are a drag on earnings due to acquiring brands and enhancing speed of delivery.

The daily chart for Walmart

Daily chart showing the share price performance of Walmart Inc. (WMT)
Refinitiv XENITH

The daily chart for Walmart shows that the stock has been above a "golden cross" since Sept. 17, 2018, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices lie ahead. This positive signal and was still in play when the stock set its Christmas Eve low of $85.78. Investors looking to buy at the 200-day simple moving average could have done so between Dec. 17 and Dec. 27, when the average was $90.82.

The close of $93.15 on Dec. 31 was an important input to my proprietary analytics. The annual pivot remains at $103.41, which was a magnet between Feb. 19 and June 5 as this level was crossed several times. The close of $110.49 on June 28 was another important input to my analytics. Its second half semiannual value level is $101.88. The close of $118.68 on Sep. 30 was an input that calculated the quarterly risky level at $123.15. The close of $117.25 on Oct. 31 was an input that resulted in a monthly pivot for November at $121.04.

The weekly chart for Walmart

Weekly chart showing the share price performance of Walmart Inc. (WMT)
Refinitiv XENITH

The weekly chart for Walmart is neutral, with the stock above its five-week modified moving average of $118.29. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $86.91, last tested during the week of July 14, 2017, when the average was $73.34.

The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week declining to 71.07, down from 83.18 on Nov. 15. At its Nov. 14 high, this reading was above the 90.00 threshold as an "inflating parabolic bubble," which typically is followed by a 10% to 20% decline.

Trading strategy: Buy Walmart shares on weakness to the annual and semiannual value levels at $103.41 and $101.88, respectively, and reduce holdings on strength to the quarterly risky level at $123.15.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play. The close at the end of June 2019 established new semiannual levels, and the semiannual level for the second half of 2019 remains in play. The quarterly level changes after the end of each quarter, so the close on Sep. 30 established the level for the fourth quarter. The close on Oct. 31 established the monthly level for November.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.