Options Action
Friday 5:30 PM ET, Saturday & Sunday 6:00 AM ET
Options Action

Top technician: Walmart's price could get slashed on earnings this week

Buyer beware: Use caution around Walmart earnings next week

The countdown to earnings for some of the biggest retail names is officially on.

Macy's, Walmart, Advance Auto Parts and Chinese giant JD.com report this week, and one top technical analyst says there's one name that could snatch the limelight from the rest — and not for the right reasons.

On Friday's edition of CNBC's "Options Action," Cornerstone Macro's Carter Worth singled out Walmart, a stock down more than 6% in the last month, as a company that could get hammered when it reports on Thursday.

"[Walmart is] a name that did very, very well off the lows in December, up almost 35%, and is now giving some of that back. The thinking is, there's more giveback to come," said Worth.

"What we know is, the stock's relative performance to the market is probably the biggest issue. This is, by all accounts, is a breakout," Worth said, referring to Walmart's bounce off December lows, "But what it could never do, is really make new relative highs. That's the issue.

"So, absolute returns – but no alpha."

Worth also pointed out that Walmart's relative performance constituted a kind of double top; a bearish pattern that doesn't bode well for the stock, especially heading into a catalyst like earnings after a big run-up.

"This is the initial breakout move," said Worth, "Often, you will fall all the way back to the level from which you broke out, which, actually is about $104, $103 and change.

"So, a 3 to 4 percent draw down is what I'm thinking."