Listening to the Megaphone in CVS

• Posted by Greg Harmon
• on October 22nd, 2014

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CVS Corp, $CVS, has been a very strong stock. It has been in an uptrend since breaking out of a consolidation range at then end of 2011. Like every stock it has not had a straight walk higher. There have been pullbacks and advances that have moved it higher. Man of those pullbacks have reversed upon touching or just below the 100 day Simple Moving Average (SMA). This happened last week as well. So what is different now?

The chart above shows that trend and the importance of the 100 day SMA. But it also shows the making of an expanding wedge pattern. Also known as a Megaphone, traders like to think if it as a reversal or topping pattern. And it can be. But it is more formally an expanding range and can be watched for a break both ways. In the present iteration the break would look for a $6.50 move, so over 84 the target becomes 90.50. But failure at the top trend line of the megaphone carries a potential trade back to the bottom of the pattern. From there you can look again for a break or reversal.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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