Cardinal Health (CAH) may finally have the right medicine.
The CAH chart, below, shows the stock price had been in a consistent downtrend from January of this year, making a series of lower lows and lower highs. However, late August saw a violation of that downtrend line and the stock managed to make a higher high in mid-September.
The market selloff in October resulted in CAH successfully testing its $50.00 support level. Now, the stock has managed to move above high volume resistance at the $54.50 level that has been a barrier since June. Good trading volume has accompanied this move Thursday.
In our opinion, there is now no substantial overhanging supply until the $62.00 level with a gap just above that at $63.50. We suspect support to appear around $52.50. Also, CAH has regained its position above its 50-day and 150-day moving averages. Relative strength to the S&P 500 is showing improvement as well.
Given that CAH had previously violated its downtrend, based for approximately six months and has now violated long-standing resistance with respectable volume, we believe it has formed a bullish reversal pattern.