Cardinal Health, Inc. (NYSE: CAH) seems to be poised for a price surge as per its latest charts. The company provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. The company operates in two segments, Pharmaceutical and Medical.
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock looks poised for a breakout from the symmetrical triangle pattern.
CAH – Daily Chart
#2 Price above MA: The price is currently above the longer-term moving average of the 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#3 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#4 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#5 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
CAH – Weekly Chart
#6 Positive OBV: The weekly chart shows that the OBV indicator is currently rising. OBV rises when volume on up weeks outpaces volume on down weeks. A rising OBV typically reflects positive volume pressure that can lead to higher prices.
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of CAH above the price of around $89.80.
TP: Our target prices are $95 and $98 in the next 3-6 months.
SL: To limit risk, place stop-loss at $87.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 5% to 9% in the next 3 to 6 months.
For a risk of $2.80, our target rewards are $4.70 and $8.20. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the symmetrical triangle pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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