CVS Has a Very Make-or-Break Setup - Here Is How to Trade It

CVS Health has converging support and resistance levels, thrusting shares into a make-or-break setup. Here's how to trade CVS stock now.
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CVS Health  (CVS) - Get Report has come a long way from its second-quarter lows near $50, although shares have been relatively stagnant over the past few months.

Walgreens Boosts Alliance's  (WBA) - Get Report recent plunge after missing on earnings has done little to shake CVS stock, although the action certainly hasn’t helped. The stock now sits in a make-or-break position, at least in the short to intermediate term.

Shares gapped higher in November on better-than-expected earnings, and continued higher to a 52-week high of $77.03 later in the month. Since then though, shares have had trouble garnering much upside momentum, falling about 5% from those highs over the last six weeks.

Can CVS stock get back on track? That’s exactly what the Real Money team is trying to answer on Monday, after naming CVS its Stock of the Day.

Let’s look at the charts.

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Trading CVS Stock


The recent action surely has some bulls disappointed in CVS shares. That’s fair, particularly as the rest of the U.S. stock market continues to bombard its way to record highs.

While CVS stock is only a few percent below its 52-week high, it’s well below its all-time high, which sits at just over $100 a share and was set back in mid-2015.

As for the “right now” setup, CVS lacks momentum. Not only has the stock been trending sideways to lower for almost two months, but it’s now below its 20-day and 50-day moving averages. The action has allowed a short-term downtrend mark to form (blue line) as well. 

That said, CVS has a longer-term uptrend mark (purple line) and a level of support near $71.50 (black line).

This is where we get our make-or-break takeaway, as both support and resistance are in play and closing in on each other.

If the stock moves lower and closes below $71.50, short-term bullish traders may consider stopping out of the trade and stepping to the sidelines. It will put the stock below all recent support and uptrend marks, leaving room down to the $68 level on a potential decline.

However, if CVS shares are able to clear the $73.75 mark on the upside, hat may fuel a run back up to $77 or higher. A move over $73.75 will propel shares over short-term downtrend resistance, as well as the 20-day and 50-day moving averages. In short, there will be nothing in the way to prevent a run back to its 52-week high.