CVS Health Corp (CVS) reported their latest earnings figures Wednesday morning. Analysts and traders initially seemed disappointed as the stock was lower in early trading although it has now reversed. Let's check out the charts and indicators to see if the patient will need more attention.
In this daily bar chart of CVS, below, I can see that prices suffered a decline over the past twelve months. Prices trade below the declining 200-day moving average line but above the rising 50-day line. The trading volume has been heavy since January and suggests that traders and investors have been voting with their feet.
The On-Balance-Volume (OBV) line declined into late May telling me that sellers of CVS were more aggressive than buyers. The rise in the OBV line the past two months may have been more short covering than outright buying.
The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but it has been narrowing and could cross to a take profit sell signal as soon as today.
In this weekly Japanese candlestick chart of CVS, below, I can see a recent top reversal pattern. When you see a top reversal pattern on the candles the technique does not tell you if it will be a decline or a sideways move. CVS trades below the declining 40-week moving average line.
The weekly OBV line has been weak for some time now. The MACD oscillator generated a cover shorts buy signal in June but it remains a long way from a buy signal.
In this daily Point and Figure chart of CVS, below, I can see an upside price target in the $82 but at trade at $70.85 could turn the chart forecast lower.
In this weekly Point and Figure chart of CVS, below, I can see a price target in the $93 area. In my opinion CVS will need to make a proper base pattern before we see this kind of upside potential.
Bottom line strategy: CVS looked poised to have a weak day in the marketplace. Traders and investors should not look to be buyers of weakness. CVS needs to hammer out a proper base pattern before I would recommend purchase of the shares. I would not rule out a retest of the $70-$65 area in the weeks ahead.
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