HAL9000
Long

Rebounding off bottom: Buy.

NYSE:CVS   CVS HEALTH CORP
164 0 4
GOOD FUNDAMENTALS
Rated buy by analysts with 20% upside
Less volatile than the market (Beta 0.89)
Sensible valuation (P/E 15.72x, P/BV 2.18x)
Healthy growth (5 yr avg revenue +10%, ROE +14%)

TECHNICALLY IMPROVING
Has been on a downtrend since the historical top of July 2015
Long and medium term technical pictures still negative
Has retraced 53% of major move started in Dec             2011
Stock now appearing oversold (RSI<30)
Has found a temporary floor at $69.30 post disappointing earnings
This also corresponds to the 61.8% Fib retracement ($68.87)

FLOWS IMPROVING
After earnings sell-off on Nov 8 the stock traded up significantly on 5.5x average volume

PLAIN VANILLA LONG STRATEGY
Buy at the market
Stop loss $69.30
Time horizon year-end

Target 1 $81.25
R/R 1.73x

Target 2 $86.00
R/R 2.82x
Trade active: CVS has handsomely breached our first upside target at 81.25, and effectively closed twice above it. The stock currently seems to be in a new breakout phase. Its behavior has been quite sound over the past couple of months:

1. Has taken its time to consolidate before consecutive breakouts;
2. Recently broken out above key 81.25 level;
3. Recent upside has been done with increasing volume;
4. Shorter-term MAs exhibiting positive behavior (crossing up).

snapshot


While the stock may seem a little overbought on the shorter time frame, it is still time to increase our trade size by 20% while raising our stop-loss from $69.30 to $77.50. Next target at 86 remains valid.

I would not put new money at play into CVS before the earnings.
Comment: Even TRUMP comments to bring down the pharma sector do not seem to impact CVS. This stock continues to look healthy. HOLD positions.
Comment: TRUMP Fears eventually hit the sector yesterday.
CVS down below support in above average volume.
This long trade is still valid above 78-79 (last close 79.49).
Stay long into earnings (Feb 9) above those levels.
Comment: CVS traded briefly and marginally below our current stop loss at 77.50 but rebounded promptly on the 78.00 support in respectable volume. Stay long ahead of earnings, particularly in the context where our trade is already in the money, and the proportion of shorts on the name has increased - Making any marginal positive news on the upcoming call a good reason for a short squeeze.
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