Walgreens Boots Alliance (WBA) Stock Could Find Resistance Where There Used to Be Support

Longs should protect their positions and take appropriate action on a close below $80 for Walgreens Boots Alliance (WBA).
By Bruce Kamich ,

NEW YORK (TheStreet) -- Shares of Walgreens Boots Alliance (WBA) - Get Report look toppy and are likely to struggle at resistance.

The chart of WBA, above, has been "rolling over" for months and traders should consider a more-defensive stance if minor support around $80 gives way. The price of WBA and the On-Balance-Volume (OBV) line peaked in early August, and both have worked irregularly lower since. Rallies into the $90 to $95 area have failed and the slope of the 50-day Simple Moving Average is negative, telling us that mathematically, we are in a down trend. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line.

The $85 level has, at times, acted as support for WBA, but a failed rally attempt earlier this month, and another attempt this past Friday, now suggests that the $85 level will reverse roles to act as resistance. Dips to, and below, $80 have seen some support in late August and earlier this month -- a close below $80 could turn this support to resistance.

This longer-term chart of WBA, above, shows prices below their 40-week moving average, a flat OBV line and a bearish MACD oscillator. With both the daily chart and the weekly chart of WBA suggesting that further declines are possible, longs should protect their positions and take appropriate action on a close below $80. The next chart support is in the $70 to $60 area.

TheStreet Ratings team rates WALGREENS BOOTS ALLIANCE INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate WALGREENS BOOTS ALLIANCE INC (WBA) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 49.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WALGREENS BOOTS ALLIANCE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, WALGREENS BOOTS ALLIANCE INC increased its bottom line by earning $4.02 versus $2.00 in the prior year. This year, the market expects an improvement in earnings ($4.42 versus $4.02).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 111.8% when compared to the same quarter one year prior, rising from -$221.00 million to $26.00 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • Net operating cash flow has slightly increased to $1,505.00 million or 8.74% when compared to the same quarter last year. Despite an increase in cash flow, WALGREENS BOOTS ALLIANCE INC's average is still marginally south of the industry average growth rate of 10.24%.
  • You can view the full analysis from the report here: WBA

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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