Part 1

Walmart Inc. (WMT)

Company Background

Founded back in 1962 by Sam Walton, Walmart Inc. is an American multinational retail corporation, operating a chain of hypermarkets, grocery stores and discount department stores. The company employs 2.2 million people and has got 11,503 stores in 27 countries around the globe, operating under 56 different names. Walmart’s business model has been extremely successful due to the fact that it offers all sorts of different products customers need gathered at one place – electronics, home & furniture appliances, home improvement, movies, music & books, baby toys and games, as well as food, household necessities, together with pharmaceutical products, health & personal care, sports and many other products. Furthermore, the company offers its products at very affordable prices, suitable for all sorts of customers.

It is important to say that during the current pandemic crisis, Walmart has actually been one of the best performing companies out there due to the fact that customers are even more cautious what to spend their hard-earned money for and therefore concentrate mainly on basic necessities for their day-to-day life, while Walmart has got it all offered at the same place.

Walmart’s success in the sector it operates has been exceptional. In fact, it has become the world’s largest company by revenue with its $524 billion for the fiscal year ending in the end of January 2020.

Technical analysis

By looking at the daily chart of the stock, we should say that Walmart was one of the companies that lost the least of their market capitalization during the sell-off caused by the coronavirus outbreak. In other words, Walmart’s stock dropped only 15% from $120 to $102 in the period between the 20th of February and the 20th of March when the stock market crashed and lots of the biggest companies out there lost 35-40% of their market value. Thus, this was a clear signal that the company has got a rock-solid market positioning and the basic necessity products it offers at affordable prices helps it survive even during the most severe crises out there. Logically speaking, a huge bullish rally followed after the stock hit the lows at $102. Investors saw this profit-taking correction as a great buying opportunity, which gives them a chance to buy the stock and own the biggest revenue generating company in the world at a 15% discount.

Logically speaking, the stock started rising immediately and has been very bullish ever since. The stock had gone to the $163 highs in the middle of November and failed to break that level again in the beginning of December, forming a double top bearish formation at that key resistance level. Logically speaking, that led to a correction afterwards that has so far sent the price towards the current levels at $145.

Recent financial performance

Let’s look at the company’s last few quarters’ performance. Even during the coronavirus pandemic and the slowdown in the economy that followed, Walmart has still managed to perform quite well and deliver strong financial results, further proving its solid business and great expectations for the future. The company beat the expectations in all 3 quarters so far in 2020 since the pandemic started. We have seen a lot better than expected earnings per share figures and that has been a main reason for the huge uptrend that has been going on the stock in 2020.

The rally from $102 to $152 in the past 9 months means the company’s stock has risen 50% and that has been extremely favourable for investors and traders who own the stock. Therefore, we believe Walmart’s business is very solid and there is a reason why the company is the biggest revenue generator in the world. So, based on all above-stated factors we have decided to add Walmart to our portfolio. The recent correction that sent the stock down from $152 to the current levels at $145-$146 is expected to come to its end soon because the price is currently testing a key support at that level where investors are expected to see the recent correction as a great entry level for their buy positions. Moreover, the lower Bollinger band is matching with the strong support at that point while the RSI has gone very close to the oversold territory, giving further bullish indications.

Chart: Walmart Inc. (WMT)

We will start buying Walmart stock at the first key support at $145-$146 where lots of buying pressure is expected. If the price drops further and breaks that first major support then we would be interested in buying more at the next support at $140 where more buying interest is likely to take place. Our initial profit-taking area is at $150-$152, followed by the next target at $160-$165 where we would be fully cashing in our profits.

Microsoft Inc. (MSFT)

Company Background

The company has been delivering great financial results in the past 5 years, growing its sales and profits, beating analysts’ expectations and thus boosting investors’ profits. Microsoft’s has got a very strong market positioning in the sector it operates, currently boosted also by its robust Commercial business and its cloud-computing service Azure and its expanding customer base. Moreover, the company keeps on expanding its user base of Office 365 and Dynamics and their results, which are also very encouraging. The company’s subscriber base has been improving its competitive edge in the enterprise communication market against Slack and Zoom. Going back to early this year when the coronavirus came around, Microsoft’s officials were a bit worried the global economic slowdown could lead to a massive reduction in their revenues and profits and the company might fail to reach analysts’ expectations for the 1st and 2nd quarter of this year. Yet, the company didn’t only meet analysts’ expectations but also managed to report better than expected and surprised the market.
Therefore, following the strong market positioning and financial performance of the company, the stock has been among the top performing ones over the past 9 months since the sell-off came to its end back in March. In other words, MSFT had gone up from the $132 lows in March to the $232 highs in the beginning of September, followed by a bit of a profit-taking interest that has sent the price towards the key support mark at $200-$210 where lots of buying pressure has been taking place in the past few months and investors and traders have already pushed it towards the current levels at $218. The company managed to beat the Q3 expectations as well, reporting $1.82 per share vs. the $1.53 expected by analysts. That has given an additional boost to the share price that is up 66% so far this year. We will be looking closely at the Q4 financial results and would be expecting some more solid figures to be reported again.
The price is currently making a bit of a profit-taking correction from the $220. We would be expecting to see lots of buying interest again once the price reaches the $210 support. It has been finding lots of buying pressure at that point ever since the price tested that level on the 23rd of November and due to the high buying interest it failed to break it to the downside. The lower Bollinger band matches with the support at that point, giving further bullish indications. Based on all the factors we mentioned above, we have decided to add MSFT to our portfolio.

Chart: Microsoft Corp. (MSFT)

We will start buying MSFT stock actively at the key support at $210. In case the price drops further we would be interested in adding more to our buy positions at the next strong support at the psychological support at $200, which would give us a chance to improve our average price and then further maximize our profits to the upside. Our first take-profit target will be at $227-$230, followed by the next target at $240-$245 where we would be fully cashing in our profits and waiting for another profit-taking correction that would give us a chance to buy again at a strong support.


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