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December 21 Chart of the Day - CVS Pharmacy

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CVS Pharmacy (CVS), one of the largest pharmacy chains with over 9000 locations, announced earlier this month that it is launching a new reimbursement model, CVS CostVantage, that will reset how reimbursement happens in an industry and ensure drug prices reflect how much pharmacies pay for the drugs themselves.

That, along with other cost savings measures, has lifted the company's stock price over 20% during the past two months. 

From a price action technical analysis perspective we can see on the monthly chart that price is essentially the same as it was 5 years ago.  That's not to say price has traded sideways during that time because it hasn't.  In fact, it's been quite volatile peaking in 2015 at all time high (ATH) $113.65 and bottoming around $50 in 2019 with plenty of ups and downs /aka/ cycles.

Along the way price has carved out a change control zone roughly between $81.37 and $84.73 (the gray shaded rectangle on the chart.)

Change control zones are one of the five price action tools we teach when charting anything.  By definition, they are an area that represents where neither the bulls nor bears are in charge.  Price can slash though the zone with seemingly reckless abandon, price can respect the top or bottom from outside it or within it.  Or, price can trade aimlessly sideways within it.  When price breaks away from the zone it can often get drawn back to it like a magnet. And in this case we see all of the above are true.

Trading at $78.01 earlier today price is seemingly charging upwards towards the change control zone yet again.

We drilled down to the weekly and daily charts to zoom in a little and to identify potential pull back levels should price decide to fade prior to reaching the change control zone.  We used an advanced Fibonacci technique as shared in our FREE Guide: 6 Fibonacci Types that Create the Most Precise Price Levels, Targets, and Reversal Zones to define the downside levels of interest.

From here, traders and investors can develop their own personal plans.

So what's next? 

We don't make predictions...

Nobody knows for sure but using these 5 price action tools traders and investors can develop levels of interest in both directions.

  1. Support/Resistance
  2. Trend
  3. Fibonacci 
  4. Supply/Demand Zones,
  5. Change Control Zones

Take a look at the charts and let us know what you think.  

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