CVS shares are breaking out to the upside after a 3-year bear market cycle, according to the charts

CVS Health (CVS) is exhibiting a bullish turnaround after a three-year bear market, with key technical indicators signaling a reversal and potential outperformance. Following a December 'shakeout' and a March monthly MACD 'buy' signal, the stock broke above weekly cloud resistance in June, establishing a higher low and forming a bullish inverse head and shoulders pattern. Its relative strength against the S&P 500 is also improving. Analysts project a potential breakout above the $69 resistance, targeting the $85 Fibonacci retracement level in the coming months, with strong support at the 200-day moving average near $61.

Analysis

CVS Health is exhibiting multiple technical signals suggesting a significant bullish turnaround following a three-year bear market that concluded with an investor capitulation event in December. A major long-term momentum shift was confirmed in March with the first monthly MACD 'buy' signal since September 2019. This was followed by a breakout above the weekly cloud model resistance in June, a development that signals the reversal of the cyclical downtrend. The stock has since established a higher low near its 200-day moving average, forming a bullish inverse head and shoulders pattern. Furthermore, its relative strength versus the S&P 500 Index is improving, indicating a potential for market outperformance after a period of lagging in 2023 and 2024. The stock is currently contending with resistance near $69, a key 38.2% Fibonacci retracement level; a sustained breakout would target the 61.8% retracement level near $85, while support is firmly established by the rising 200-day moving average near $61.

Key Decisions for Investors

• Given the confluence of bullish technical indicators, including a MACD buy signal and an inverse head and shoulders pattern, investors may consider the stock favorably for potential outperformance.
• A key catalyst for entry or adding to a position would be two consecutive weekly closes above the $69 Fibonacci resistance level, which would confirm a breakout and likely trigger an acceleration in upside momentum.
• Monitor the rising 200-day moving average, currently near $61, as a critical support level; a break below this level would invalidate the immediate bullish thesis.
• The analysis suggests a medium-term price objective near $85, offering a defined upside target for investors establishing long positions based on this technical setup.