NEW YORK (TheStreet) -- CVS Health (CVS) was called CVS Caremark until Sept. 3, when the company changed its name and stopped selling tobacco products a month ahead of schedule. Investors have been rewarded as the stock has rallied 7.6% with the S&P 500 (SPY) up just 0.8% over the same time horizon.
CVS continues to have technical momentum and should continue to the upside given a positive reaction to earnings. The company will report its third-quarter results before the opening bell on Tuesday, and analysts expect the company to earn $1.13 per share.
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Investors will be focusing on the status of the drugstore chain partnership with health care insurer Humana (HUM) . Last month CVS agreed to allow some CVS Pharmacy locations to be used by Humana to educate individuals about their health care options under the Affordable Care Act. Success of the Minute Clinics will be an important piece of guidance to watch.
The stock has been above its 200-day simple moving average since November 2012. Given this solid uptrend, investors should buy weakness using a "good 'til canceled" limit order to buy weakness to the 50-day simple moving average at $81.26.
Archrival Walgreen (WAG) ($64.22) has been a clear underperformer. This stock broke below its 200-day simple moving average on Aug. 6 and is currently trading between its 50-day SMA at $61.57 and its 200-day SMA at $65.99. While CVS trades to new highs, Walgreen is 16% below its all-time intraday high set at $76.39 on June 19. Walgreen's set its latest quarterly result on Sept. 30 for its quarter ending in August, and shares have traded sideways-to-up since then.
Let's look at the daily chart for CVS Health.
Courtesy of MetaStock Xenith
Looking from the lower left to the upper right, CVS Health ($85.81) has been above its 200-day simple moving average (green line) since Nov. 28, 2012, when this average was $45.61. The 200-day SMA was tested at $56.30 on Oct. 4, 2013, and then the stock's momentum run continued to the upside.
CVS Health had a hiccup with the market declining 7.2% from $83.45 on Oct. 10 to $77.40 on Oct. 16 before rallying 13% to $87.16 into Oct. 31.
Let's look at the weekly chart for CVS Health.
Courtesy of MetaStock Xenith
The weekly chart for CVS Health stays positive given a close this week above its key weekly moving average at $82.13. The weekly momentum reading shown on the red line across the bottom of the chart shows an overbought reading of $81.37 above $80.00.
CVS Health has been above its 200-week simple moving average (green line) since October 2011, when the average was $33.93. Today this key long-term uptrend is at $53.15.
The daily and weekly charts conclude that CVS Health belongs in your portfolio and should be bought on weakness.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates CVS HEALTH CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CVS HEALTH CORP (CVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
You can view the full analysis from the report here: CVS Ratings Report