Both WMT and COST could return to record high levels this summer
Over the past few weeks here at Schaeffer’s, we have covered a lengthy list of stocks enjoying a boost as vaccine rollouts pick up and Covid-19 cases fall by the wayside in many states. However, I thought it would be worth looking into the likes of Costco Wholesale Corporation (NASDAQ:COST), a popular stay-at-home staple, and Walmart Inc (NYSE:WMT), which were both pre-pandemic outperformers but of late have been struggling with hopes of a reopening economy. Schaeffer’s Senior Market Strategist Chris Prybal and Senior Quantitative Analyst Rocky White flagged and gathered interesting data that shows us when we may see a rebound from the now lackluster retailers. In fact, both have recently pulled back within a close proximity to the 500-day moving average -- Costco stock as recently as Friday, March 5.
Starting with COST, over the past 10 years the equity has seen seven pullbacks to its 500-day moving average, of which boasted plenty of notable gains, in both the one- and three-month time frames. Three-month returns garnered the highest gains, averaging 12.2%, while positive 86% of the time. The median return came in at 15.7% for the same period, suggesting that by early June, Costco stock has a decent chance of being well on its way back into record-high territory. For the one-week, one-month, and three-month returns anytime during the past decade, the latter-most time frame only produced a 71% positivity rate.
From a more technical standpoint, COST has struggled to take hold of any positive ground since hitting a record high near $388.07 back in December. The equity also sports a grim 13% year-to-date deficit, indicating the stock’s underwhelming price performance is far from surprising news to up-to-date options traders.
Next we are channeling WMT, and over the past 10 years the equity has seen 10 pullbacks to its 500-day moving average, of which, also garnered upbeat returns. However, the post-signal returns for Walmart stock came in significantly lower than those for COST. One-month returns posted the highest gains, averaging 4.2%, with a 60% win rate. The median return came in at a measly 0.12% for the same period, suggesting that by this time next month, the Target (TGT) rival may be sporting marginal gains at best. Looking from a wider scope, for the three-month returns anytime during the past decade, only a 61% positivity rate was produced.
In terms of Walmart stock’s chart performance, the blue-chip mogul also hit a record peak this past December, climbing to just above the $153 level. Since then, per Thursday’s close of $132.13, the security has shed about 14% and now sports an 8.1% year-to-date deficit.
So what does this mean moving forward for these retail giants? This data and its noteworthy signals are unable to take into account is the Covid-19 pandemic. Specifically, how stay-at-home stocks will recover in the wake of U.S. President Joe Biden’s freshly passed $1.9 trillion relief bill, or the surge in vaccine rollouts that have left many investors more hopeful and eager to invest in sectors that will thrive when more of the economy opens up. On the other hand, if past is precedent, these retailers -- especially Costco stock -- are bound to see some type of resurgence within the next few months.
Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, March 14.