CVS shares are breaking out to the upside after a 3-year bear market cycle, according to the charts

CNBC

2 hours ago

CVS Health (CVS) has a bullish turnaround underway after a three-year bear market cycle culminated in a shakeout of "weak" holders in December. Shakeouts are usually associated with investor capitulation, leaving major lows in their wake. Long-term momentum shifted meaningfully behind CVS in March, when the monthly MACD confirmed its first "buy" signal since September 2019. The turnaround phase comes within the context of a secular trading range that has had a hold since 2015. [Chart: CVS Health Corp. (CVS): Weekly Bar Chart + Cloud Model + Relative Strength vs. SPX] CVS broke out above resistance from the weekly cloud model (shaded area on the chart) in June, which confirmed that the cyclical downtrend had been reversed in a long-term bullish development. A higher low has been established relative to December, near the 200-day moving average (MA), giving the chart the look of a bullish inverse head and shoulders pattern. Looking at CVS relative to the broader market, the ratio versus the S & P 500 Index (SPX) also appears to be turning the corner per the flattening 40-week moving average, supporting outperformance in the months ahead. This is a departure from the stock's persistent underperformance in 2023 and 2024. Today, CVS is above a 38.2% Fibonacci retracement level resistance near $69 that defines the top of an intermediate-term trading range. A breakout would be confirmed with two consecutive weekly closes above that level and would likely result in acceleration in positive short-term momentum. Should CVS lift out of its trading range, as we expect, the 61.8% Fibonacci retracement level near $85 would look achievable over the next several months. Support is well-defined by the 200-day MA, currently rising on the chart near $61. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: None. 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