CVS Health (CVS) posted a first-quarter 2023 earnings beat Wednesday morning but set their future guidance below consensus. The stock is lower in early trading Wednesday but let's see how things look in the context of the past year's price action.
In the daily bar chart of CVS, below, I can see that the shares have weakened since December. Prices made a low in March and are making a slightly lower low in April/May. Trading volume has been much more active since the beginning of the year.
The On-Balance-Volume (OBV) line declined from December to March but has not made a new low to confirm the price weakness. The 12-day price momentum study made a low in March and a higher low in April to generate a bullish divergence when compared to the price action. A bullish divergence is not a hard and fast buy signal rather it just says that prices are "due" to improve.
In the weekly Japanese candlestick chart of CVS, below, I can see some promising developments. I can see a number of lower shadows in March and April. Prices are well below the declining 40-week moving average line but this is a lagging indicator.
The weekly OBV line has been weak but is showing signs of stabilizing in April. The MACD oscillator is below the zero line but it has been narrowing and is close to a cover shorts buy signal.
In this daily Point and Figure chart of CVS, below, I can see a potential downside price target in the $54 area.
In this second Point and Figure chart of CVS, below, I used weekly price data, which project a price target in the $67 area.
Bottom-line strategy: Charts of CVS are mixed and I am encouraged by some lower shadows and slower momentum readings. The worst of the decline could be behind us and my next recommendation on CVS is likely to be a buy. Meanwhile keep your powder dry.
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