Bull Signal Could Push CVS Health Stock Towards 2022 Highs

The equity is marginally lower in 2022

Deputy Editor
Sep 1, 2022 at 11:14 AM
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This commentary first appeared on Forbes Great Speculations, where Schaeffer's Investment Research is a regular contributor.

CVS Health Corp (NYSE:CVS) stock has taken a step back on the charts, after a mid-August rally lost steam just above the $107 level, coming shy of its Feb. 8, annual high of $111.25. However, CVS could make another move towards its 2022 highs, and chip away at its 3.5% year-to-date deficit, given the equity is trading near a historically bullish trendline.

According to Schaeffer's Senior Quantitative Analyst Rocky White's latest study, CVS Health stock is within one standard deviation of its 40-day moving average. The security has seen nine similar signals over the past three years, and was higher one month later 78% of the time, averaging a 5.1% gain for that period. A similar move from its current perch of $99.53 would place the equity back above the $104 region.

CVS Chart August 31

The shares appear to be overdue for a short-term bounce. This is per CVS Health stock’s 14-day Relative Strength Index (RSI) of 27.5, which sits firmly in "oversold" territory.

An unwinding of pessimism in the options pits could provide additional tailwinds. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CVS’ 10- and 50-day put/call volume ratios of 2.25 and 1.46, respectively, stand in the 97th and 100th percentiles of their annual ranges. This means puts have been getting picked up at a faster-than-usual clip of late.

 

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