Key Takeaways
- Walmart shares climbed to a new record high on Wednesday after Jefferies analysts said that the big box retailer’s investment in AI has the potential to nearly double its operating income by fiscal 2029 by streamlining operations.
- Walmart shares have trended sharply higher in 2024, but an RSI reading above 85 increases the likelihood of a retracement.
- Amid periods of profit taking, Walmart shares may find support at key chart levels including $62, $55.50, and $51.
Walmart (WMT) shares climbed to a new record high on Wednesday, adding to this year’s impressive gains after Jefferies analysts said that the big box retailer’s investment in artificial intelligence (AI) has the potential to nearly double its operating income between fiscal 2023 and fiscal 2029 by streamlining operations.
Below, we zoom out to Walmart’s weekly chart and use technical analysis to identify key levels to watch out for.
Stock Moves Into Heavily Overbought Conditions
Since retracing to the 50-week moving average in December, Walmart shares have tracked sharply higher, with the price continuing to trend upwards after breaking out from a pennant pattern on above-average volume in mid-May.
However, while the relative strength index (RSI) points to strong price momentum, it also increases the likelihood of a retracement with a heavily overbought reading above 85. The last time the indicator flashed at these levels in January 2018, the stock subsequently slumped more than 20% over the next four months.
To speculate how much further the stock may run before a pullback occurs, we can take a bars pattern from the December low to the March high and overlay it from the pennant pattern’s breakout point. This projects a move to around $73, which sits just 3.7% above Wednesday’s close of $70.41.
Monitor These Levels During Retracements
Amid periods of profit taking, it’s worth monitoring these three key areas where the retailer’s shares may find buying interest from investors seeking lower entry points.
The first level to watch sits around $62, a location on the chart that may attract buyers near the pennant pattern’s high.
A move below this location could see the shares revisit support near $55.50, where they could find a floor around two twin peaks that formed between September and November last year.
A more significant retracement could trigger a fall to around $51, an area likely to attract bargain hunters near a key trendline that has flipped from resistance into support and currently sits in close proximity to the rising 200-day moving average. A retest of this level would see a correction in the stock of about 28% from Wednesday’s close.
When scouring these levels for a potential reversal back to the upside, look out for bullish candlestick chart patterns, such a hammer or piercing line, to confirm a shift in investor sentiment.
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As of the date this article was written, the author does not own any of the above securities.