Dow component Walmart Inc. (WMT) is trading lower by around 1% in Tuesday's pre-market after reporting in-line fourth quarter 2019 revenues and missing earnings per share (EPS) estimates by a small margin. Quarterly revenues rose just 2.1% year over year, continuing a string of steady but slow growth. The stock bounced off a deeper low after the company announced an annual dividend of $2.16 per share for fiscal year 2021, $0.04 higher than the last fiscal year.

The retail giant's stock has acted poorly since the last quarterly report in November, dropping nearly 6% while the Dow Jones Industrial Average has lifted to an all-time high. Even so, 2019's healthy 27% return has kept shareholders warm at night, while the current correction makes sense given the market's long-observed tendency for rallies that make big moves to carve equally big bases after topping out.

WMT Long-Term Chart (1993 – 2020)

Long-term chart showing the share price performance of Walmart Inc. (WMT)
TradingView.com

A multi-year uptrend ended at a split-adjusted $16.84 in 1993, giving way to a slow-motion decline that bottomed out in the single digits in 1996. The subsequent uptick mounted the prior high in 1997, setting off a period of intense buying interest that continued into the December 1999 peak at $70.25. That marked the highest high for the next 12 years, ahead of a vertical slide that found support in the mid-$40s in March 2000. A slightly lower low at $41.44 in October rounded out a trading range that contained price action for the next 12 years as well.

A 2002 uptick into the mid-$60s marked the highest high for the rest of the decade, while 2005, 2006, and 2007 tests at 2000 support found willing buyers. The stock held up relatively well during the 2008 economic crisis, with many analysts expecting the company to benefit from new customers hit hard by the downturn. Even so, Walmart stock continued to underperform into the fourth quarter of 2011, when a rapidly improving U.S. economy generated committed buying interest.

That uptick reached the 1999 high in 2012 and broke out, but gains were limited into a 2015 rally that ended with a failed breakout when e-commerce took huge market share from brick-and-mortar retailers. The decline settled in the lower $50s in October, marking a major buying opportunity, ahead of a multi-wave advance that reached a new high in 2017. Buying pressure eased at $110 in early 2018, while a June 2019 breakout above that level posted an all-time high at $125.38 after the November earnings report.

The monthly stochastic oscillator crossed into a sell cycle from the overbought zone in November 2019, predicting at least six to nine months of relative weakness. The indicator is just now crossing the panel's midpoint, while this morning's downturn confirms that bears remain in control. As a result, it's likely that the stock will post lower lows into the spring or summer, potentially finding support near the rising trendline and 50-month exponential moving average (EMA) in the mid-$90s.

WMT Short-Term Chart (2017 – 2020)

Short-term chart showing the share price performance of Walmart Inc. (WMT)
TradingView.com

The on-balance volume (OBV) accumulation-distribution indicator ended a long-term accumulation phase in February 2018 and turned lower for the rest of the year, coming to rest at a 17-month low. Buying power in 2019 reached 2017 resistance at the same time the stock posted the all-time high and reversed, highlighting OBV's power to predict price action. It has now settled into a holding pattern just below the red line, pointing to a garden-variety correction that may not have run its course.

The stock is trading at the 50-day EMA ahead of Tuesday's opening bell after breaking out above that resistance level last week. Watch this level closely because the outcome of this bull-bear conflict could dictate price action through the rest of the first quarter. Specifically, a close above $117 or so could set the stage for a buying spike above $120, while a close under that level raises the odds that the stock will test the 200-day EMA at $113.

The Bottom Line

Walmart stock is trading lower after the retail giant missed fourth quarter profit estimates, and the shares could hit a new 2020 low before attracting committed buying interest.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.