PreMarket Prep Stock Of The Day: Walmart

Whether you follow analyst price target adjustments or not, their actions do have an impact on an issue's price, especially in the short term.

Before Tuesday's open, Goldman Sachs maintained its Buy rating on Walmart Inc. WMT and raised the price target from $184 to $196. The stock also was added to the firm’s Conviction Buy List.

The corresponding price action makes it the PreMarket Prep Stock Of The Day.

The Set-Up: Walmart has been participating in the recent broad market rally. The issue bottomed Oct. 4 at $134.71, along with the S&P 500, and came into Tuesday’s session on a three-day winning streak.

On Monday, Walmart closed at its highest level since Sept. 28 at $141.68. It should be noted the issue was on the cusp of a breakout to the upside, as it had made four daily highs at the $142 area since Sept. 28. Included in that group was Monday’s high of $142.01.

Aggressive PreMarket Buyers: With the analyst action taking place overnight, traders had to wait until the open of the premarket trading (4 a.m.) to purchase shares of the issue. In fact, its low in the premarket ($143) hasn't been revisited in the regular session.

Buyers Beware: Although the issue was due to opening sharply higher around the $145 area, early buyers still had a chance to profit on the long side, but they had to be quick to exit. After a sharply higher open ($144.63 vs. $141.68), the issue surpassed the premarket high ($145), reaching $145.61 and sharply reversed course.

Within five minutes, it was back under $145 and heading much lower. Once the issue breached the opening price, the pace of the decline accelerated. As of 12:40 p.m. EST, $143.66 stands as the low for the session and has reentered the $144 handle.

Moving Forward: Investors that regret not owning the issue before the price target change should focus on the $142 area. The reason being, that would fill the gap (or void in price), instigated by Goldman Sachs.

If one is to follow one of the basic tenets of technical analysis -- that old resistance becomes new support -- then $142.01 may be a potential area of support.

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.