Part 5

In order to help our followers maximize their profitability, we have decided to analyze the performance of some of the biggest companies within the two ETFs (SPY & XLY).

Walmart Inc. (WMT)

Company Background

The first stock pick from the SPY for today would be Walmart Inc.

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. In fact, it has managed to reach the $151 highs on the 2nd of September, meaning that it has managed to break by far the $120 highs back in February before the pandemic started. Walmart didn’t only keep its market presence and performed very well during the pandemic, but its share price was also among the top performing stocks over the past 7 months, bouncing 50% and making huge profits for its traders and investors.

In the past few weeks we have seen a bit of a profit-taking correction from the $151 highs towards the key support at $135 where lots of buying pressure took place and investors pushed the price higher immediately once it reached that level. The stock then broke the strong resistance at $140, which is now the key support level we are looking to open our buy positions at. The technical indicators have remained bullish and giving further buying indications.

By taking into account the great financial performance of the company over the past 5 years as well as during the coronavirus pandemic and its huge presence on the market, we remain very bullish on Walmart’s stock and believe there is more money to be made to the upside. We will also be looking forward to the upcoming 3rd quarter earnings report but there is still some time till then as the company is announcing its earnings on the 12th of November.

Chart: Walmart Inc.

We will start buying WMT stock at the current $143 just above the key support mark at $140 where lots of buying pressure is expected. In case the price drops further, we would be interested in adding more to our buy positions at the next key support at $135 where more buying activity is expected. Our first take-profit target will be set at $150, followed by the next target at $160-$165 where we would be fully cashing in our profits.

Amazon Inc. (AMZN)

Our first stock from the XLY today would be Amazon Inc. (AMZN)

Company Background

AMZN was one of the best performing stocks during the coronavirus pandemic. The company has seen a further growth in its customers’ online purchasing power and that has led to the stock breaking new records and reaching its new all-time high at $3552 on the 2nd of September. In fact, the stock is up 110% since the coronavirus sell-off occurred back in February and the market bottomed out around the 20th of March. In other words, investors and traders who bought back then have more than doubled their money already!

Amazon Inc. is one of the largest e-commerce providers, headquartered in the US and already spreading its services across the globe. The company’s online retail business is presented through its Prime program, which is well supported by its massive distribution network. Moreover, its $13.7 billion acquisition deal of the well-knows supermarket chain Whole Foods back in 2017 helped Amazon establish its footprint in the physical grocery supermarket space.
Furthermore, Amazon enjoys its current dominant position in the cloud-computing market, particularly in the infrastructure segment, thanks to its Amazon Web Services (AWS) – one of the company’s high-margin generating businesses. Amazon has also approached the households with its Alexa powered echo devices. Alexa is backed by Artificial Intelligence and is helping the company sell its products and services.

Amazon has got a big weight and plays an important role in both the SPY (2.90%) and the XLY (22.38%).

Amazon’s presence on the market is extraordinary and it proved that further during the heavy times during the first wave of the coronavirus pandemic. It was actually one of the best performing companies and stocks out there and has kept on making lots of money for its shareholders for a long time now.

The company is expected to deliver its 3rd quarter earnings on the 22nd of October and the expectations are for $7.33 per share, while the company delivered only $4.23 in the same quarter of last year. In other words, analysts covering the company are expecting that it has done ever better now even during the pandemic of coronavirus. How is that possible? Well, the main reason is because when people were stuck at home they had a lot more time to go online and look for their favourite products on the Amazon. That by itself helped Amazon further increase its presence as a leader in the e-commerce market.

We believe the company could beat analysts’ expectations and deliver a better-than-expected figure, which would further boost its share price to the upside afterwards.
From a technical standpoint, we have seen something very positive on the chart in the past few days. The price managed to break the key resistance at $3218-$3220 and closed a daily candle above that level, giving further bullish indications. Moreover, the technical indicators are still heading north and giving more buying signals. The strong support (broken resistance) at $3220 is expected to bring more buying pressure once the price tests that level to the downside and that is the level at which we would be interested in buying and taking advantage of the huge bullish rally on the stock.

Chart: Amazon Inc.

We will start buying the stock aggressively at the first key support at $3220. In case the price drops further in the short-term we would be interested in adding more to our buy positions at the next key support at $3100. Our first take-profit target will be set at $3450-$3500, followed by the longer-term target at $3750-$3800 where we would be fully cashing in profits and waiting for another pullback on the stock that would give us a chance to buy again and make more money to the upside.

Sincerely,

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