Walgreens stock is down 20% this year and around 50% down from the 2015 high.
After 4 straight years of declines, perhaps the stock is due for a rebound.
Carter Worth, the chief technician at Cornestone Macro thinks so.
“It hit that line quite nicely, finding a level where principal support comes into play, and the whole thesis here is: Having sold off 50% down to a level where rebound potential is high, you play for a rebound.”
Since plunging in early April after reporting fiscal second-quarter earnings, the shares have traded in a relatively tight range of just about $49-$55, and have been trending upward since the end of May.
Net income for the last few years has been:
2015 – 4.22bn
2016 – 4.17bn
2017 – 4.08bn
2018 – 5.02bn
Part of the reason for the decline has been the Amazon story and that is an obvious concern for the company. However, with the stock hitting key support and now back above the 20 and 50 day moving averages, the risk reward here seems more favorable.
A pullback to test the rising 20 day moving average would provide and attractive entry point for a bull put spread or a wheel trade, with a stop loss just below the rising 50 day moving average.
The August 16th 55-50 put spread is currently trading for around $0.87. If that spread got up to $1.10 I would be interested in selling it.
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.