History Says CVS Stock's Pullback Could Work Out

CVS stock just pulled back to a historically bullish trendline

Deputy Editor
Apr 29, 2021 at 1:42 PM
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The shares of CVS Health Corp (NYSE:CVS) have faced continued pressure at the $78 region, making a few attempts to topple the ceiling over the last few years, including on April 21, when the stock rose to $77.44 -- its highest level since late 2018. Pullbacks have followed each attempt, but despite the up-and-down year, CVS still boasts an 11.3% rise in 2021. This most recent pullback saw the equity find a floor at $75, and what's more, a historically bullish technical signal just started flashing on the charts, which could send CVS toppling this aforementioned pressure near the $78 level. 

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, CVS just came within one standard deviation of its 40-day moving average. Within the past three years, seven similar signals have occurred, with the equity higher one month later in 71% of those instances, averaging a 21-day gain of 5.4%. At CVS's current perch of $76.06, a similar move would put it at $80.17 -- marking a fresh three-year high. 

CVS Chart April 29

A shift in the options pits could provide additional tailwinds for the stock. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CVS sports a 50-day put/call volume ratio that stands higher than 76% of all other readings from the last year, implying a healthier-than-usual appetite for bearish bets of late. 

Echoing this, the stock's a Schaeffer's open interest ratio (SOIR) of 0.54 sits in the elevated 85th percentile of its annual range. This suggests short-term traders have rarely been more put-biased. 

Right now, options look like a prudent play when weighing CVS's next move. The stock's Schaeffer's Volatility Index (SVI) of 25% stands higher than just 19% of all other annual readings, meaning options players are pricing in relatively low volatility expectations at the moment. 

 

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