Retail drugstore operator Walgreen Company (WAG) seems to have the right medicine to push its stock price higher still.
On Tuesday the company’s strong fiscal fourth-quarter earnings sent the stock higher. In other news, on Tuesday the Affordable Care Act opened up for enrollment. Walgreen is likely to benefit from the so-called Obamacare as its pharmacy operations stand to see increased traffic.
On the charts, the stock speaks a clear language, which makes it hard stock for bears to fight. After topping out in the second half of 2006, Walgreen proceeded to plummet roughly 60% over the course of the ensuing two years. Since the broader market bottom in late 2008/early 2009, however, the stock has again showed signs of life as it developed a series of higher lows, albeit in a choppy fashion.
In the spring of this year the stock began to bump into its all-time highs from 2006 — and while failing to penetrate above there, the stock settled into a consolidation phase below those levels. Ultimately Walgreen had spent enough time coiling up below the all-time highs and by mid-September had built up enough steam to rally sharply and push through those levels.
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On the daily chart, note that on Sept. 12 Walgreen not only broke to fresh all-time highs, but also pushed out of a so-called inverse head-and-shoulders pattern, which I drew on the chart. The stock then continued to push higher into Sept. 23, when it settled into a five-day consolidation pattern. On Tuesday, on the back of its earnings announcement the stock then broke higher again, out of the consolidation pattern (although it did stop shy of making a new year-to-date high).
Tuesday’s rally came on great volume of around 13.70 million shares, which matches the volume from the Sept. 12 breakout. Barring any major reversal in coming days, Walgreen’s stock price looks set to move to higher levels still.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.
