CVS pulled back to a historically bullish trendline
Health insurance stocks slid yesterday, after final Medicare Advantage (MA) payment rates fell below expectations. The news also impacted CVS Health Corp (NYSE:CVS) stock, which staged a 7.2% drop -- its worst daily percentage loss since August. Shares are only modestly higher in today's recovery -- up 0.7% at $74.37 at last glance.
For those looking to buy the dip, however, the recent pullback has CVS within one standard deviation of its 200-day moving average, a trendline with historically bullish implications. According to Schaeffer's Senior Quantitative Analyst Rocky White, the equity has seen two similar signals in the past three years, after which it was higher one month later each time, averaging a 3% gain.
Furthermore, CVS Health stock's 14-day relative strength index (RSI) of 29.4 is in "oversold" territory, which is typically indicative of a short-term bounce. The stock had been climbing before yesterday's gap lower, which was only its third daily loss since March 14. Since the start of the year, CVS is down 5.7%.