CVS – Technical Analysis – CVS Health (NYSE:CVS)

Shares of CVS Health Corporation CVS are trading lower on Thursday. This move could destroy important supports. A new downward trend could be emerging.

Our team of experienced traders and technical analysts made it our “Stock of the Day.”

In the stock market, some price levels are more important than others. These are called “support” and “resistance” levels.

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When a market is trending downward, it is because sellers are overwhelming buyers. There are not enough buy orders to fill all sell orders.

Sellers are forced to push the price lower, resulting in a downtrend. Finally, when there is enough demand, the price stops falling.

This happens at support levels. When a market is trending up, the opposite dynamic is at play. There are not enough sell orders to fill all buy orders.

Buyers are forced to push the price higher, resulting in an uptrend. Finally, when there is enough supply, the price stops rising.

This happens at resistance levels.

The term “market memory” means that some key support and resistance levels can retain their meaning over a long period of time. It can take weeks, months or even years.

As you can see from the short-term chart, the $52.50 level has been key support for CVS over the past year. When stocks reached this target in May and November, a trend reversal followed.

Short term chart

Now it looks like this important level has been broken. Buyers may have exited the market and sellers may need to lower the price to attract them back.

This level has long been important to CVS.

CVS’s 8-year chart illustrates an example of market memory.

The $52.50 level first became support in May 2019. In March 2020 it was a support level again.

And last June there was support again.

Long term chart

“Market memory” is real. Some analysts may find it difficult to believe that a key price level can be important for so long. But CVS’s chart proves it.

Now that the support at this level has finally been broken, there is a good chance that the downward move has just begun.

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