CVS Health Corporation, together with its subsidiaries, provides integrated pharmacy health care services in the United States. The Pharmacy Services segment offers pharmacy benefit management services, such as plan design and administration, formulary management, Medicare Part D services, mail order and specialty pharmacy services, retail pharmacy network management services, prescription management systems, clinical services, disease management programs, and medical pharmacy management services. The Retail Pharmacy segment sells prescription drugs, over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, seasonal merchandise, and greeting cards, as well as provides photo-finishing services.
Take a look at the 1-year chart of CVS (NYSE: CVS) below with my added notations:
CVS has created a common chart pattern known as a symmetrical triangle. Combining a down trending resistance (red) with an up trending support (green) forms the triangle pattern. As the support and resistance converge on each other the pattern is created. Since there is no true way to know which way the stock will break, most traders will wait for the breakout or breakdown before entering a trade.
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The Tale of the Tape: CVS has formed a simple symmetrical triangle. A trader could enter a long position on a break above the down trending resistance (near $98) with a stop set under the entry level. However, if CVS were to break below the trend line support (currently near $95), a short trade could be entered with a stop above the trend line.
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
Follow me on Twitter: @cmtstockcoach