CVS Health Corporation (CVS:NYSE)
Price at Preparation: $64.59 (October 4^th, 2024)

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What they do

CVS Health Corporation (CVS:NYSE) is a health solutions company which operates in four segments:

• Health Care Benefits: offers a range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare supplement plans, and Medicaid health care management services.
• Health Services: provides a full range of pharmacy benefit management solutions, delivers health care services in its medical clinics, virtually and in-home, and offers provider enablement solutions.
• Pharmacy & Consumer Wellness: dispenses prescriptions in its retail pharmacies and through its infusion operations, provides ancillary pharmacy services, including pharmacy patient care programs, diagnostic testing and vaccination administration.
• Corporate/Other: management and administrative expenses.

Welcome back to Theta Bandits Top Pick Tuesday, where we strive to bring you relevant free content, searching the markets and reacting to be ahead of what we think could be a new potential winner in any portfolio.

Opinion

In May 2024 CVS Health Corporation (CVS:NYSE) missed their earnings and gapped down significantly and hit a 52-week low of $52.77 USD. For the next several months the stock has been trading sideways and consolidating. CVS stock has already been “in jail” if you look back further, dropping down from $100+. Currently after this consolidation we are noticing the stock price breaking out of the current range trying to regain share price and hopefully start to trade in the previous consolidation phase which is a step higher. This breakout could confirm it is time to enter the trade and we can target filling the gap down they had earlier this year as well as have targets to the next consolidation range.

The analyst street consensus is 15 Buys, 13 Holds, 0 Sells and the 12-month Price Targets (PT) as follows:

• Low: $60.00 USD (-7.22%)
• Average: $66.14 USD (+2.27%)
• High: $86.00 USD (+32.98%)

Plan

As usual, find the visual aid below with following colors:

• Blue: 52-week high.
• Red: 52-week low.
• Green: 12 Month PTs (high / avg / low).
• Orange: Support/resistance lines, gap to fill area.
• Yellow: Our plan and targets.

In the visual aid for below, note the yellow lines depicting the consolidation ranges discussed above. In the current bottom range, the price tried to break out multiple times and each time failed around the same price area. This time however we have seen a much stronger move from the bottom of the trading range and as of now has seemed to break through. On the chart to the left circled in orange indicates the gap to be filled which is currently in progress. What we are looking for is the price to complete this “fill the gap” action and move into the targets trading range from roughly $67 USD to $81 USD.

Once in this target trading range, we have outlined three target resistance lines to secure profit at $70.15 USD, $75.39 USD and $80.76 USD. As we always recommend – stop-losses should be set and used to mitigate risk on the position move as per your risk tolerance. Use the orange support/resistance lines to update these as the price moves through the lines.

It is nice to have a plan for the price to keep going up, however we do need to keep guard up and point out events that cause potential volatility on the price. First, on October 21^st is their ex-dividend for a payment of $0.665 USD / share for an annual yield of 4.03%. Second on November 6^th is their next Quarterly Earnings Report (ER). It is important to consider these factors when planning and placing trades.

This is only one method how to trade this movement. We discuss other potential methods to attack this stock live IF you sign up to attend our weekly Theta Bandits Webinar – When we trade together, we learn together!

RISKS

The goal is to grow capital by securing profits along the way and limiting losses. Make sure to plan to trade within your risk tolerance, allowing time for success while updating limits and exit points to mitigate risk.

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Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.