Trading in Walmart Inc. (NASDAQ:WMT) is quiet Wednesday. The company reports its earnings tomorrow.
Sometimes, the price action ahead of earnings can give insight into a stock’s future trend, and Walmart could be setting up for a move higher. This is why it is the Stock of the Day.
For example, there are times when a company reports blowout earnings, and the stock drops. Many investors and traders don’t get why this happens.
But it’s easy to understand.
Everyone who wants to buy does so before the earnings are actually released. When the earnings hit the tape, there is no one left to buy. The market has run out of buyers, and a market with no buyers can only go down.
This is where the old saying ‘buy on the rumor, sell on the news’ comes from.
Walmart Stock Trading Sideways
The forces of supply and demand are equalizing. There is no aggressive buying. As you can see on the chart below, Walmart is testing a resistance level.
Resistance is a price where there is a large number of sellers.
If a stock is trending higher, it is out of equilibrium. There isn’t enough supply or sell orders to fill all of the demand or buy orders.
Those who wish to buy are forced to outbid each other, and this pushes the shares higher.
At resistance, things change. There is enough supply to fill all of the demand, and the uptrend ends.
But there are times when a stock reaches resistance and the buyers eventually overpower the sellers. Then the price moves higher. We call this a ‘breakout’.
This can be seen as a bullish dynamic. With these sellers out of the way, the stage could be set for a move higher. Buyers will once again be forced to outbid each other to draw the sellers in, and this will form a new uptrend.
After the earnings come out tomorrow, traders will be watching the $117 level closely. Walmart could end up breaking out.
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