Both WMT and COST could return to record levels this summer
Over the past few weeks we’ve covered a long list of stocks here at Schaeffer’s that are seeing a surge as vaccine adoption rises and Covid-19 cases fall by the wayside in many states. However, I thought it was worth looking into the likes of Costco Wholesale Company (NASDAQ: COST), a popular home staple, and Walmart Inc (NYSE: WMT)who were both outperformers before the pandemic but have recently been grappling with hopes of the economy reopening. Schaeffer’s Senior Market Strategist Chris Prybal and Senior Quantitative Analyst, Rocky White have reported and collected interesting data that shows us when we can see a recovery from the now lackluster retailers. In fact, both recently retreated near the 500-day moving average – Costco stock didn’t pull up until Friday, March 5th.
Starting with COST, equity has seen seven declines to its 500-day moving average over the past 10 years, with numerous notable gains in both the one-month and three-month periods. The three-month returns had the highest gains averaging 12.2% while being positive 86% of the time. The median return over the same period was 15.7%, suggesting that Costco stock has a good chance of getting back to record levels in early June. For the one-week, one-month, and three-month returns over the past decade, the latter timeframe only yielded a positivity rate of 71%.
Tech-wise, COST has struggled to hit positive bottom since hitting a record high near $ 388.07 in December. The stock has posted a grim deficit of 13% since the start of the year, indicating that the stock’s underperformance is not surprising news for current options traders.
Next, we’re channeling WMT, and in the past 10 years equity has seen 10 pullbacks to its 500-day moving average, some of which have also produced positive returns. However, post-signal returns for Walmart stocks were well below those for COST. One-month returns saw the highest increases, averaging 4.2% and a 60% win rate. The median return over the same period was a modest 0.12%, suggesting that rival Target (TGT) could at best make marginal gains by then next month. From a larger perspective, the three-month returns have only achieved a positivity rate of 61% at any time during the past decade.
In terms of chart performance for Walmart stock, the blue-chip mogul also hit a record high last December, rising to just above the $ 153 level. Since then, the security has lost around 14% per close of trading on Thursday from $ 132.13, and has been in deficit of 8.1% year-to-date.
What does this mean for these retail giants? These data and their remarkable signals cannot account for the Covid-19 pandemic. Specifically, how stocks that stay home will rebound amid President Joe Biden’s freshly passed $ 1.9 trillion relief bill or the surge in vaccine launches that have made many investors more hopeful and eager, investing in sectors that will thrive as more of the economy opens up. On the flip side, those retailers – Costco stocks in particular – are set to see some revival over the next few months when the past sets a precedent.
Bernie Schaeffer’s subscribers Chart of the week received this comment on Sunday March 14th.