Sell CVS Health for a chance to buy at these potential levels

CVS Health Corporation (NYSE:CVS) stock consolidated at the key level of around $110, signaling that it was time to exit. The healthcare solutions company has returned a negative 7% year-to-date. It should be noted that the loss in the year comes at the back of a strong rally throughout 2021. The stock rose from a low of around $72 in January 2021 to top $110 at the start of this year. 

Evidently, CVS Health’s weakness can be attributed to profit-taking after the stock hit the key resistance of above $110. The weakness is bound to continue as the stock faces imminent pressure after breaking below the consolidation zone.

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On Wall Street, CVS has a hold rating at Deutsche Bank with a price target of $110, which the stock has already hit. The rating is a downgrade from the previous buy recommendation by the bank. Some other analysts, including Raymond James, have a higher target of $120. However, we remain less optimistic the stock will rise to $120 in the short-term as weaknesses persist. Consequently, investors could be looking to cut positions.

CVS retreats after hitting resistance

Technically, CVS is coming down from an overbought level of $110 when the RSI was 78. The current weakness is bound to continue, with an established support zone around $70-$80. The stock could also settle at around $90 and begin a bullish reversal from there. The quarter results on May 04 could trigger the rise from $90 if results beat estimates. We still maintain the stock could fall to $70-$80, the established support.

Summary

Investors should sell CVS Health stock ahead of earnings and buy lower. The stock could fall up to $70-80, the key support zone. If earnings beat estimates, the stock could reverse around $90.

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