Walmart Plunges 2.44%: Can This Bearish Reversal Signal a Sector Shift?

Summary
• Walmart (WMT) trades at $101.095, down 2.44% from its previous close of $103.62
• RSI hits 85.83, signaling extreme overbought conditions
• Bearish 'engulfing' candle forms amid 52-week high of $105.30
• Sector leader Amazon (AMZN) defies trend with 1.14% intraday gain
Walmart's sharp intraday decline has created a critical inflection point. With the stock trading near its 200-day moving average of $93.70 and facing key technical resistance at $102.80, the bearish engulfing pattern and overbought RSI suggest a potential reversal. This move occurs against a backdrop of mixed retail sector performance, where Amazon's outperformance raises questions about Walmart's strategic positioning.

Bearish Reversal Amid Overbought Conditions
Walmart's 2.44% intraday drop is driven by a classic bearish reversal pattern: the candlestick 'engulfing' formation, where a large bearish candle completely covers the previous bullish candle. This pattern, combined with an RSI of 85.83 (well into overbought territory), signals exhausted bullish momentum. The stock's price action has also broken below its 30-day moving average of $98.04, triggering technical selling. While the long-term bullish trend remains intact (price above 200-day MA), the immediate technical setup favors a continuation of the downward move until support at $97.45 or $94.64 is tested.

Retail Sector Splits as Amazon Outperforms
The retail sector shows divergent performance, with Amazon (AMZN) rising 1.14% while Walmart declines. This contrast highlights shifting consumer preferences and market sentiment toward Amazon's e-commerce dominance. Leveraged retail ETFs like RTH (+0.57%) and IEDI (+0.66%) outperform Walmart, suggesting investors are rotating into more dynamic retail plays. The sector's mixed performance underscores Walmart's vulnerability to competitive pressures and valuation concerns.

Bearish Options Playbook: Leverage Put Spreads for Volatility
• 200-day MA: $93.70 (below current price)
• RSI: 85.83 (overbought)
• MACD: 1.86 (bullish) vs. Histogram: 0.70 (declining)
• Bollinger Bands: Price at $101.095 (near lower band of $92.28)
• Key support: $97.45 (30D) / $94.64 (200D)
• Sector ETFs: FSTA (-0.29%), VDC (-0.18%), RTH (+0.57%)

Two top bearish options for a 5% downside scenario (targeting $96.04):
• WMT20250822P95 (Put, $95 strike, 2025-08-22):
- IV: 37.82% (moderate)
- Leverage: 194.19%
- Delta: -0.153 (moderate sensitivity)
- Theta: -0.019 (slow decay)
- Gamma: 0.037 (high sensitivity to price moves)
- Turnover: $64,987
Payoff: $96.04 → $95 strike → $1.04 intrinsic value
This put offers aggressive leverage with strong gamma to capitalize on further declines.
• WMT20250822P96 (Put, $96 strike, 2025-08-22):
- IV: 37.15% (moderate)
- Leverage: 148.50%
- Delta: -0.193 (higher sensitivity)
- Theta: -0.015 (slow decay)
- Gamma: 0.044 (very high sensitivity)
- Turnover: $71,952
Payoff: $96.04 → $96 strike → $0 intrinsic value (break-even)
This put provides balanced risk/reward with high gamma to benefit from volatility expansion.

Aggressive bears should consider a WMT20250822P95 long position into a breakdown below $97.45 support. Conservative traders may use WMT20250822P96 as a hedge against further declines.

Backtest Walmart Stock Performance
The backtest of Walmart (WMT) after a -2% intraday plunge shows favorable short-to-medium-term performance. The 3-day win rate is 59.97%, the 10-day win rate is 65.87%, and the 30-day win rate is 75.76%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 7.64%, which occurred on day 59, suggesting that WMT can generate decent returns even after a significant intraday dip.

Position for the Next Leg Down: Key Levels to Watch
Walmart's bearish reversal has created a high-probability short-term trade. With RSI overbought and the engulfing pattern confirmed, the stock is likely to test critical support at $97.45 before the 200-day MA at $94.64. The selected put options offer leveraged exposure to this scenario, particularly if volatility expands. Investors should monitor Amazon's performance as a sector barometer and watch for a breakdown below $97.45 to confirm the bearish case. Act now with WMT20250822P95 for maximum leverage, but exit if the stock closes above $102.80 to avoid trend reversal risks.