Trading Idea - CVS Caremark Broke Support, What to Expect?

Published on Thursday, 26 August 2010 04:28 Written by Danny Miller

New York, August 26th (TradersHuddle.com) - Shares of CVS Caremark Corporation (NYSE:CVS) closed the trading session at $28.03 below calculated support at $28.30 breaking the stock technically, raising concerns by investors, as the move might trigger more selling.

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' stock was trading in a well defined range with support at $28.30 and resistance at $32.09; given that this range was broken traders will be closely monitoring the stock?s price action for clues of direction.

From a technical perspective it can be expected that previous support becomes resistance, as the new range gets defined, however, given that CVS' stock is still near the broken support, traders will be focusing on $28.30 to see if the stock can bounce back and return to its previous range.

Traders wanting to establish a short position in CVS Caremark can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $28.30. For traders wanting to establish a long position, wait for price action to take the stock back to calculated support, which will provide a best entry point to build the position.