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| 3/10/99 CVS Corp (CVS)
Points to watch: The drug store stocks have
been one of the most consistent performers during the past 3 years but have recently shown
signs of topping out. CVS stock is forming a double top, with peaks in December and
February (A move below 47.38, the 50% retracement of the 8/98-2/99 rally is needed to
confirm a double top) . The stock has fallen below both its 21 day (52.59) and 55
day (52.34) moving averages. The stock closed Tuesday just above the Fibonacci
support at 49.9 (the 38% retracement level) and above important Gann support
at 49.88. This support angle has acted as support on 3 major tests since October.
A break below support would be bearish, with the next downside support coming at
47.38 and then 45.63. The 200 day moving average (45.31) will also provide support
on a decline. The 200 day provided support during the September lows, and the stock
has remained above it since 1997. Technical indicators have been deteriorating since
late December and did not confirm the stock's February top. Weekly MACD, OBV, RSI,
and stochastics all showed strong negative divergence with price during the February
highs. We would be sellers of the stock on a break below 49.9, with an initial
downside target of 47.38 and a second downside target of 45.63.
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