Will CVS Health Corp. Sustain on Higher Levels After A Sharp Rally?

Source: ranjith ravindran, Shutterstock

Summary

  • CVS Health Corp. made a new lifetime high and delivered a return of ~39.50 percent in the past six months.
  • CVS Stock prices are trading in a rectangle channel formation on the daily chart.
  • The stock price has broken a falling trendline on the weekly time frame chart and getting major support from the 50-period SMA.

The CVS Health Corp. (NYSE: CVS) price has witnessed a sharp rally of ~39.50 percent as the stock moved from the low of USD 55.36 made in October 2020 to the recent 52-week high of USD 77.23 level tested on 12 January 2021, . As per the current chart pattern, the prices have been moving in the rectangle channel formation for the past six months on the daily chart and trading in the range of USD 67.11 - USD 76.11. On Monday, the stock prices closed at USD 74.46, up by 0.53%. Some of its peers, such as Walgreens Boots Alliance Inc. (NASDAQ: WBA) rose by 0.96% and PetMed Express Inc. (NASDAQ: PETS) fell by -1.09%.

CVS on a daily chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group 

The prices are trading above an upward sloping trendline support level of USD 69.50 (black color line in the above chart) and continuously taking support of the same. Besides, the price is trading above its 50-period SMA, which is acting as a crucial support level. The momentum oscillator RSI (14-period) is trading at ~53.62 levels, indicating a positive trend for the stock. Furthermore, the price is trading above its Parabolic SAR indicator acting as immediate support for the stock. However, the MACD is showing a negative crossover, which depicts a negative stance for the stock.

CVS on a weekly chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group 

The stock has broken out of its falling trend line (black color trendline in the above chart) at USD 71.50 level on March 10, 2021 and after that the prices are sustaining above the breakout level. CVS stock price is facing strong resistance around the horizontal trendline at USD 77.44 level, which drifted the prices towards the falling trend line support zone.

The price is well placed above its 50-period SMA, acting as the important support for the stock at the lower end. However, the momentum oscillator RSI (14-period) is trading at ~56.72 level and formed a negative divergence with the price action indicating that a correction from here may drift the price lower towards the support zone.

Furthermore, the prices are trading below the Parabolic SAR indicator, acting as an immediate resistance zone for the stock. However, the prices are hovering around the major resistance level USD 77.44 and a downside movement from the current levels might drift prices lower towards the 50-period simple moving average (SMA).

Based on the above chart analysis and technical outlook, CVS Health Corp. price seems to be in an uptrend. The chart patterns suggest that there might be more action expected in CVS if the price breaks the important support levels.


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