CVS Health Corp. (CVS) together with its subsidiaries, is a pharmacy company operating through three business segments: Pharmacy Services, Retail Pharmacy and Corporate. The stock is currently trading around $113.17 at the upper end of its 52 week range of $74.69-$113.65. The stock has been out performing the market this year rallying 17.44% year to date. CVS is scheduled to report earnings before the opening bell tomorrow, and the stock is down $0.69 or 0.61% on the session ahead of the close.
Over the past 11 quarters CVS has rallied on earnings day 8 times with an average move of 1.85%. The stock appears very bullish on a chart going into the release having traded above the Ichimoku Cloud since mid-June on the daily bars. Over the past 11 quarters CVS has rallied on to the nearest options expiration 8 times with an average move of 3.2%. Investors are mostly watching how the newly opened stores are operating after seeing increased sales. The ExtraCare Rewards Program and newly launched beauty elevation program will drive growth. With the stock trading above the cloud, great earnings history and positive growth with new stores it is hard to justify anything but a long position in TSN.
The options market is currently implying a move of around $3.36 or 3.0% in CVS by the end of this week giving us targets of $109.79 and $116.51.
Trade: Buy this week’s 115-117 Vertical call spread for $0.51
Risk: $51 per lot
Reward: $149 per lot
Breakeven: $115.51