Retail giant Walmart Inc. (WMT) had a winning streak of beating earnings per share estimates in seven consecutive quarters. This came to an end on Feb. 18, when the company missed expectation. As a result of this miss, the stock entered a period of extreme volatility. Walmart shares traded as low as $102.00 on March 16 and then traded as high as $128.08 on March 18 for a spike of 25%. This range remains in play, with extreme volatility in between.

Walmart is a component of the Dow Jones Industrial Average, and the stock has posted a gain of just 2.5% year to date, although it is in bull market territory at 23.2% above its low of $98.85 posted on May 9, 2019. The stock is 4.9% below its high of $128.08 posted on March 18, 2020. Walmart stock is not cheap, as its P/E ratio is 24.66 with a dividend yield of 1.77%, according to Macrotrends.

The daily chart for Walmart

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

The daily chart for Walmart goes back 52 weeks. The stock had 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 would follow. This buy signal and was still in play when the stock set its March 18 high of $128.08. The extreme volatility between March 16 and March 26 ended this signal.

The stock began 2020 above its annual pivot at $116.42, which has been a magnet since Jan. 7. The semiannual risky level at $126.15 was tested between March 18 and April 7 as an opportunity to book profits. The second quarter pivot at $121.14 and the monthly pivot at $120.18 were magnets last Thursday, April 9. The 50-day and 200-day simple moving averages are converging at $115.79 and $116.00, respectively.

The weekly chart for Walmart

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

The weekly chart for Walmart is positive, with the stock above its five-week modified moving average at $116.42. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $91.79, 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 ended last week rising to 51.28, up from 48.24 on April 3. Back in October 2019, this reading was above the 90.00 threshold, putting the stock in an "inflating parabolic bubble" formation, which contributed to the downside volatility.

Trading strategy: Buy Walmart shares on weakness to the annual pivot at $116.42 and reduce holdings on strength to the semiannual risky level at $126.15.

How to use my value levels and risky levels: The stock's closing price on Dec. 31, 2019, was an input to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the closing price on March 31. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels are in play all year long.

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. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered "too cheap to ignore," which is typically followed by gains of 10% to 20% over the next three to five months.

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