In his second "Executive Decision" segment of Mad Money on Monday night, Jim Cramer checked in with Larry Merlo, president and CEO of CVS Health Corp. (CVS) , the drug store chain that has pledged to donate areas of its parking lots for COVID-19 testing.
Merlo explained that they are currently working out the details of how to provide secure areas for safe, effective testing. He said customers have been stocking up, but so far they've only seen a few spot shortages of merchandise. Merlo said they are working to cover the costs of COVID-19 testing and are also adding zero co-payments for telemedicine to help reduce the need to see a doctor in person.
In this daily bar chart of CVS, below, we can see that prices peaked back in November. There looks like there has been three waves lower (yes that is very subjective) and prices have retraced all the gains back to last June. I think the risk is out of this name.
Prices are below the declining 50-day moving average line and below the cresting 200-day moving average line. The trading volume has been heavy from late February to now and that suggests that we may have seen some "throw in the towel selling" which can help to identify a low.
The daily On-Balance-Volume (OBV) line has declined from December but the line looks like it has slowed its decline this month.
The Moving Average Convergence Divergence (MACD) oscillator is well below the zero line, but we could see a cover shorts buy signal if prices improve soon.
In this weekly bar chart of CVS, below, we can see that prices have been retesting the lows of 2019. Prices are below the cresting 40-week moving average line.
The weekly OBV line has been drifting lower the past four months and the MACD oscillator is close to moving below the zero line for an outright sell signal.
In this daily Point and Figure chart of CVS, below, we have a mixed picture. Yes the software shows a potential downside price target around $40 and that is bearish. The chart also shows that there could be good buying interest in the $52 area as there was good volume by price activity there before. We'll see.
Bottom line strategy: Technical analysis can be subjective at times. I could easily write something bearish about CVS and no one would blink. I can also find some bullish clues this morning but the weakness in the broad market could easily dominate. For now, let's keep an open mind that CVS has corrected enough and that buyers could be attracted around current levels.
(CVS Health is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CVS? Learn more now.)
