CVS Health Corporation (CVS)

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Trading CVS as Amazon Enters Pharmacy Space
By: TheStreet | November 17, 2020

• Amazon is entering the pharmacy-delivery space, and shares of Walgreens and CVS drop. Here's how to trade the drugstore chains now.

Amazon (AMZN) is entering the pharmacy-delivery space, and the move sent a shudder through the industry.

While Amazon is up 1% on the day, CVS Health (CVS), Walgreens (WBA) and Rite Aid (RAD) are all under pressure on the news.

CVS Health and Walgreens are two of the biggest players in the space and are each down more than 8% on the day.

Bulls will argue the obvious, which is that both stocks trade at low valuations — Walgreens trades at 8.5 times this year’s earnings estimates while CVS trades at 9 times — and both pay nice dividends.

They’ll also argue that this news shouldn’t be all that surprising, with Amazon acquiring PillPack in 2018.

Let’s look at the charts to see what’s going on and what might happen next.

Amazon and CVS are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN or CVS? Learn more now.

Trading CVS Stock


Daily chart of CVS stock.

Chart courtesy of Stockcharts.com

As Real Money contributor and legendary technician Helene Meisler points out, CVS has an island top reversal formation on the daily chart (highlighted by the blue circle).

Tuesday’s action has CVS stock blowing through its recent consolidation zone, putting $65 back in play. While acting as support in early February, this level had been resistance multiple times since then.

The bulls will want to see CVS find its footing near this zone. Should it fail, the backside of prior downtrend resistance (blue line) and a collection of key moving averages between $61 and $62 will be the next area of support.

On the upside, I want to see CVS reclaim $69.50...

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