For contrarian investors, there is an opportunity arising from the stock market loving Amazon on its loss and hating Walmart on its win.
In the U.S., investors are used to Amazon AMZN being No. 1 in e-commerce. However, the future growth is in India and China. To the casual investor, it may come as a shock that, despite massive investments and massive losses, Amazon lags far behind in India. India has 1.3 billion people and e-commerce is in its infancy. Therefore, it matters. Flipkart previously bought India’s eBay EBAY site.
Amazon likes to be No. 1. So Amazon’s solution was to attempt to buy Flipkart. However, Amazon was beaten to the punch by a company from home that most of you know for lagging in e-commerce: Walmart WMT. Let’s explore this issue with the help of a chart.
Please click here for an annotated chart of Walmart. Please note the following from the chart:
• The chart shows that, initially, the stock market liked the rumor of Walmart buying Flipkart and, as a result, beating Amazon.
• The chart shows a gap down in Walmart stock after Walmart won, owing to the effect on its earnings per share. More on this later.
• The chart shows that, not long ago, the sentiment on Walmart was extremely positive. Extremely positive sentiment is often a contrary indicator. The reason is that anybody who was going to buy would have already bought it and a tiny bit of bad news can send the stock lower. This is exactly what happened to Walmart stock.
• The chart shows that sentiment is now negative. If the sentiment becomes even more negative, it will provide a better buying opportunity even though there is a buying opportunity right now.
• The chart shows the support zone.
• The chart shows that Walmart stock fell on heavy volume. But the volume was not heavy enough. This means that everyone who is likely to sell has not yet sold.
• Relative strength index (RSI) is oversold. Normally this is a buy signal. However, in this case, RSI is not oversold enough….Read more at MarketWatch.
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