4 Trade Ideas for CVS Health: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

CVS Health, $CVS, ran from a low in May to a peak in November. It held there into 2020 and then started lower in mid-January. It found support at the end of the month and bounced to a lower high in mid-February. The second leg lower was much more drastic, taking it back below the 200 day SMA for the first time since September. It bounced at the end of the month and made another lower high before a third move lower to the broad consolidation occurring now. Last week ended with the stock pushing up to the top of the range and finishing at the 20 day SMA.

It has a RSI turning up and moving toward the mid line with the MACD crossed up and at the reversal point from the prior Bull Run. There is resistance at 59.75 and 61.75 then 64.50 and 66.75 before 70. Support lower comes at 57 and 55 then 52. Short interest is low at 1.5%. The stock pays a dividend with an annual yield of 3.41% and starts trading ex-dividend on April 22nd. The company is expected to report earnings next on April 29th.

The April 3 Expiry options chain show large open interest at the 60 and 69 strikes on the call side, along with a smaller cluster from 50 to 52 on the put side. April monthly options show open interest spread from 50 to 65 on the put side and bigger and more focused from 57.50 to 72.50 on the call side. The May 1 Expiry chain, the first to cover the earnings report, has biggest open interest from 62.50 to 64.50 on the call side. Finally the May options chain has biggest open interest from 60 to a peak at 62.50 then tailing to 67.50 on the put side, but larger from 62.50 to 75 on the call side.

CVS Health, Ticker: $CVS

Trade Idea 1: Buy the stock on a move over 59.75 with a stop at 57.25.

Trade Idea 2: Buy the stock on a move over 59.75 and add an April 57/52 Put Spread ($2.50) while selling a May 65 Call ($2.00).

Trade Idea 3: Buy the April/May 65 Call Calendar ($1.50) and sell the April 52 Put (50 cents).

Trade Idea 4: Buy the May 50/60/65 Call Spread Risk Reversal for $1.00.

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After reviewing over 1,000 charts, I have found some good setups for the week.  These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with only 2 trading days left in the 1st Quarter, sees equity markets sitting in bear market territory even after what were some new bull market qualifying bounces.

Elsewhere look for Gold to continue its consolidation in the uptrend while Crude Oil moves toward 20 year lows. The US Dollar Index continues to whipsaw with a short term downtrend while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to continue the short term drift higher while Emerging Markets continue towards the lows.

The Volatility Index looks to remain extreme making the path filled with craters for equity markets. Their charts look solid in the short term after strong moves higher, but with a large swath of traders anticipating the reversal from a bear market rally anytime. The longer charts showed a sold reversal, and follow through next week could sway a lot of opinions (read money). Use this information as you prepare for the coming week and trad’em well.

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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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