Retail Stocks Earnings Wreck – Will they Recover?

Tom Gentile

Posted in Strategy

By: Tom Gentile on June 2nd, 2022 • 3 mins read

Mid-May to the end of May was the primary time when many major US Retailers reported their earnings and revenue.

Many of the majors, like Walmart, Costco, Target even global online retail giant Amazon.com, Inc. reported lower than expected earnings (at the end of April).

This caused many if not all these stock to drop in share price. Almost all of them cited the same concern and challenge that caused their eps and revenue miss and would make it challenging in the upcoming quarter.

The challenge(s) being supply chain concerns, rising inflation / pricing, and shortage of labor.

As stated many of these companies stock price took major hits on the report, and it didn’t help the market was in a more bearish mode. The earnings misses and the share price drops in these companies, some would say, helped contribute to the slide.

AMZN dropped 400-points in a day, TGT dropped 60-points in a day, and WMT saw a drop in the ballpark amount of 30-points on the day of their report.

Are the Charts on Retailers Showing Signs of Things Getting Better?

These and other retailers trailed off even more, but as of late their may be signs of a recovery of sorts for these stocks. I am not saying the bear market is over. I am not saying these stocks will lead us out of a pending recession.

I am simply stating or rather showing in the stocks charts there is some upward buying pressure at least, showing the possibility investors are stepping in and accumulating the stocks.

It could simply be a valuation play, where though there is potentially more downside risk for these stocks, value hunters are stepping in and taking a risk in buying these. Based on the stock prices being beat up post-earnings, accumulation of these stocks at these prices is deemed less of a risk.

I have taught in past articles the technical analysis pattern of old support becoming new resistance and vice-versa.

Some of these stocks are at or nearing a point where that may occur. This isn’t a way to discourage one from taking a bullish position, stock, or options, in these, but part of the way to educate 1) the recovery in these stocks may continue, 2) may be worth looking in to a Put Credit Spread under the support levels of these and 3) stating if you have taken a position already its worth discussing with your broker if some profit taking is worth considering.

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Figure 1: WMT Earnings Drop and Possible Old Support / New Resistance
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Figure 2: TGT Earnings Drop and Possible Pivot Low Support
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Figure 3: WMT Earnings Drop and Possible Pivot Low Support

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