Why Express Scripts Stock Could Improve From Here

 | Mar 28, 2018 | 3:44 PM EDT
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Express Scripts (ESRX)  was inspected earlier this month, where I wrote, "Bottom line: It looks like ESRX can test and break minor support around $72 and we could see prices weaken for another week or two. Longer-term we could see ESRX rally again." Prices have weakened since the beginning of the month and I am sitting on the fence about the next move for ESRX. A bullish divergence from our momentum indicator is pointing to a recovery rally in the near-term. Let's look closer.

In this daily bar chart of ESRX, below, we can see that prices gapped higher earlier this month but quickly reversed direction and declined to fill the gap and then some. Prices are below the declining 50-day moving average line but above the rising 200-day line. There is some minor chart support in the $69-$68 area and the 200-day line intersects around $67. Some technically oriented traders may look to buy against these levels. If they have discipline they will quickly jump ship if these levels are violated. The daily On-Balance-Volume (OBV) line is pointed down telling us that sellers of ESRX have been more aggressive this month. In the lower panel we see equal momentum lows in February and March even though prices have made lower lows in this time period. This is a bullish divergence and it could be foreshadowing better prices in the near-term.

In this weekly bar chart of ESRX, below, we get a different picture than the daily chart above. In this chart we can see a long decline ending late last year followed by an upside breakout and rally. The price action the past three months on this chart looks like a sideways consolidation pattern. Prices are above the rising 40-week moving average line. The weekly OBV line is more neutral looking the past three months while the Moving Average Convergence Divergence (MACD) oscillator is in a negative configuration.

In this Point and Figure chart of ESRX, below, we can see two lows at $69.45. A trade down to $68.77 will be a new low and could open the way for deeper losses. A bearish downside price target of $54.32 is shown but I would not be that bearish considering all the other charts we have shown you today.

Bottom line -- ideally ESRX will hold above $67 and trade higher this spring but a break of $67 could mean a test of the $64-$62 area. I am not as bearish as the Point and Figure with a $54 target but I would be cautious with a positive bias.

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