Momentum in the consumer trade may be starting to stall out after leading the markets higher for so much of the year, and some of the major players in the space are hitting a wall. Walmart, Target, Coca-Cola and Home Depot — among others — are all down over the last month as the high-flying consumer space collectively begins to run out of steam.
These stocks aren't all without hope, however, and the group will have a chance at redemption when Walmart reports earnings before the bell on Thursday. Despite the stock's recent struggles, options traders are betting that the retail giant could climb back toward its all-time highs by the end of the week.
"Walmart's implying about a 4% move up or down. That's a little higher than average. Over the last four quarters it's been about 3%," Realm Capital founder Roger DaSilva said Tuesday on "Fast Money."
As DaSilva would point out, that slightly inflated implied move into the weekend is likely due to the 6% post-earnings jump Walmart experienced after a strong report in August. This time around, traders are betting on Walmart to pick up right where that last report left off.
"Two times the [volume of] calls have traded versus that of the puts," said DaSilva. "Most of the open interest has been in the 120-strike calls and the 125-strike calls."
At minimum, buyers of those 125-strike calls are betting on a 5% move to the upside. This is a bit rich to the 4% implied move but certainly not out of the realm of possibility given that the options market is betting on Walmart to produce a result similar to August's surprising report.
If Walmart fails to impress, however, the fallout will likely be felt by the rest of the consumer space. Ironically, the stock itself isn't too far away from a key downside support level, pending an earnings miss.
"You have this uptrend from the December low, touching the August low, [and now] we're right there at the highs," said DaSilva. "Based on the implied move, you could see a nice upside move to well over $120, or on the downside, you're talking around $115, where there should be some support."
Walmart was trading slightly higher in Wednesday's session.
