Is CVS Caremark Reversing?

Published on Tuesday, 07 February 2012 04:30 Written by TradersHuddle Wire

New York, February 7th (TradersHuddle.com) - Shares of CVS Caremark Corporation (NYSE:CVS) closed the trading day flat by $0 or -0.01% from its previous close. CVS' shares price action formed what is considered to be a doji close, where the open and close prices are very close to each other, mainly signaling an indecision between buyers and sellers.

CVS Caremark Corporation (NYSE:CVS) is a pharmacy services company that operates a chain of drugstores located throughout the United States. The stores offer a wide range of branded and generic drugs, as well as household goods. The Pharmacy Service segment provides a range of prescription benefit management services, including mail order pharmacy services, specialty pharmacy services, plan design and administration, formulary management, and claims processing.

CVS' current stock range is defined by a trough, which marks calculated support at $36.44 and by a peak that marked the resistance point at $43.98. These levels are closely watched by traders managing their positions.

Traders wanting to establish a position in CVS Caremark or traders that are already holding the stock can use the doji close to their advantage, since the pattern present a short term pause in the stock's price action. This pause results in an entry point for traders depending of which way the stock resolves this short term indecision.

Doji are important candlesticks that provide information on their own and as components in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns.

Any bullish or bearish bias is based on preceding price action and future confirmation. In the case of CVS Caremark, given that the stock finished the session flat, traders will be looking at both sides of the doji, a bullish bias will materialize if the stock manages to break today's intraday high, on the flip side, a bearish bias will haunt the stock if it breaks today's intraday low. Below a Doji illustration: