Cardinal Health, Inc., is a healthcare services company, which provides pharmaceutical and medical products and services in the United States and internationally. The company operates in two segments: Pharmaceutical and Medical. The Pharmaceutical segment distributes branded and generic pharmaceutical, over-the-counter healthcare and consumer products, to retailers, hospitals, and other healthcare providers. This segment offers distribution, inventory management, data reporting, new product launch support, and contract pricing and chargeback administration services to pharmaceutical manufacturers; operates nuclear pharmacies and cyclotron facilities that manufacture, prepare, and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and clinics; franchises retail pharmacies under the Medicine Shoppe and Medicap brands. The Medical segment distributes a range of medical, surgical, and laboratory products to hospitals, surgery centers, laboratories, physician offices, and other healthcare providers; and offers supply chain services, including spend and distribution management, and inventory management services to healthcare providers. This segment also develops, manufactures, and sources a line of private brand medical and surgical products, including single-use surgical drapes, gowns, and apparel; exam and surgical gloves.
To review Cardinal’s stock for potential trading opportunities, please take a look at the 1-year chart of CAH (Cardinal Health, Inc.) below with my added notations:
CAH has recovered nicely from its September low, but if you look across the whole year you will notice that the stock has created an important price level of $40 (blue). First you can see the several touches of $40 as support. Then, you can see how $40 was resistance in August and September. Now that CAH is back above the $40 one would expect it to become support again if the stock pulls back down to it.
The Tale of the Tape: CAH looks like it is pulling back to the $40 level. A long position could be entered on a pullback to $40. If the stock were to break back below $40, a short trade might be considered instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT