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6 months ago
Can CVS follow Rite Aid? | $CVS
CVS Health Corporation (NYSE: CVS) has been a major disappointment for investors, having lost over 50% of its value from 2015 highs, before finally finding a bottom in the summer of 2019. These declines were not confined to just CVS; as Rite Aid (RAD) and Walgreens (WBA) also had similar drops.
In it’s most recent earnings report, RAD produced an earnings surprise, which led to a nearly 200% jump in the stock and has now eased. Tomorrow, we will get a WBA earnings report, which could move CVS and give us a tell into the future for the entire sector.
In late December 2019, JP Morgan analyst, Lisa Gill, named CVS as her top pick in the healthcare tech and distribution for 2020. She also raised her price target to $97 from $88 and maintained an overweight rating on the stock. The average price target among the 26 analysts covering the stock is $81.48, so her target is a vote of confidence for investors.
It must be considered that the stock has a P/E ratio of 21 and provides a yield of 2.71%.
Now, Let’s Have a Look at the Technical Setup by Examining the Weekly and Daily Charts.
The Weekly Chart is Very Informative and Showing Us a Very Important Break of Trend:
- Bullish break above downtrend.
- Buyers back in control of stock.
- Moving averages converging so initiate another significant move.
- Stock already had a deep retrace.
- A move above $84 would give us a bullish higher high.
- Obvious that CVS has a long runway to get back to old highs.
To Get a More Detailed Picture of the Situation, Let’s Examine the Movement on the Daily Chart:
- OBV has crossed bullishly across zero line.
- Histogram is ticking higher.
- Await MACD to reverse on approach to zero line.
- 50/100/200 moving averages all in strong uptrend which should halt any downturn.
- Major price rejections at the $83 area which should be considered if a bull run does occur.
Targets to consider:
Short term $83.00 to horizontal resistance
Medium Term $91.00 to Fibonacci golden pocket
Longer term $100 psychological level of importance
A break above the $75 and the falling 200 moving average could be a good entry point on CVS.