CVS Health Corp. (CVS) is due to report their latest quarterly figures on Tuesday so this is a good time to check on the health of the charts and indicators.
In our October 7 review of CVS we wrote that "CVS has broken down from a top formation. Expect further declines with a tentative price target of $71. Stand aside."
In this daily bar chart of CVS, below, we can see that prices gapped lower in early October. Trading volume swelled as traders voted with their feet. In the past two weeks prices have drifted higher on reduced volume and formed what I would label a "bear flag" formation. Flags are continuation patterns and I would look for CVS to renew its downward trend.
Prices are still below the declining 50-day moving average line and the bearish 200-day line despite the price bounce. The On-Balance-Volume (OBV) line shows us weakness from the middle of August telling us that sellers of CVS are more aggressive than buyers.
Looking at this weekly Japanese candlestick chart of CVS, below, we are not encouraged. Prices have made what I believe is a large top pattern - a lopsided double top. The June low was broken to complete the pattern and open the way to further declines. Prices trade below the declining 40-week moving average line.
The weekly OBV line shows a decline from January. The MACD oscillator is bearish.
In this daily Point and Figure chart of CVS, below, we can see that prices reached a downside price target in the $89-$88 area.
In this weekly Point and Figure chart of CVS, below, we can see a potential downside price target in the $70 area.
Bottom line strategy: I have no special information about what CVS is going to tell the marketplace on Tuesday about their earnings and prospects, but the charts are weak and I would avoid the long side.
