McKesson Corporation (MCK) shares rocketed 4.26% Friday after federal health officials said that the pharmaceutical wholesaler would distribute a coronavirus vaccine when one is approved. According to the U.S. Health and Human Services Department, McKesson will distribute COVID-19 vaccines and associated supplies in collaboration with the Centers for Disease Control and Prevention (CDC) to clinics, hospitals, and pharmacies, per The Wall Street Journal.
- McKesson will collaborate with the CDC to distribute COVID-19 vaccines in the United States.
- Shares rallied from a multi-month trendline, which could result in further buying.
- Cardinal Health, Inc. (CAH) shares find support at $52 from a confluence of indicators.
- A cross of the moving average convergence divergence (MACD) indicator above its trigger line may soon generate a buy signal in AmerisourceBergen Corporation (ABC) shares.
Through Friday's close, McKesson stock has a market value of $25.74 billion, offers a 1.10% dividend yield, and is up 22.93% over the past three months. From a valuation standpoint, the shares trade at 10.79 times projected earnings, slightly below their five-year average multiple of 11.79 times.
Price rallied Friday from a multi-month trendline extending back to the pandemic selloff low. The wide-ranging day occurred on the heaviest volume since late June, increasing the potential for follow-through buying in the days ahead. Swing traders who buy here should book profits on a test of the 52-week high at $171.25. Protect capital by cutting losses if the stock closes beneath the 50-day simple moving average (SMA).
Wide-ranging days describe the price range of a stock on a particularly volatile day of trading. Wide ranging days occur when the high and low prices of a stock are much further apart than they are on a typical day.
Those who follow drug dispenser stocks should also take a look at two other leading industry names that saw share prices rise after news surfaced McKesson would distribute a coronavirus vaccine nationwide. Below, we review their recent quarterly earnings and turn to the charts to identify possible trading opportunities.
Cardinal Health, Inc. (CAH)
With a market capitalization exceeding $15 billion, Cardinal Health operates as a global logistics provider engaged in wholesale pharmaceutical and medical products. The Dublin, Ohio-based drug distributor posted fiscal fourth quarter adjusted earnings per share (EPS) of $1.04, comfortably topping the Street expectation of 91 cents. However, the bottom line contacted 6.3% from the year-ago period due to weakness in the company's pharmaceutical segment. As of Aug. 17, 2020, Cardinal stock issues a healthy 3.71% dividend yield and has gained 14.52% since mid-May.
From late February, the shares have traded within a broad ascending triangle. Traders should consider buying the recent dip to $52, where price finds a confluence of support from the pattern's lower trendline and 200-day SMA. In terms of trade management, set a stop-loss order beneath the August low at $51.61 and target a move to the triangle's top trendline around $59.
An ascending triangle is a chart pattern created by price moves that allow for a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. A stock typically breaks out in the price direction preceding the pattern.
AmerisourceBergen Corporation (ABC)
Headquartered in Chesterbrook, Pennsylvania, AmerisourceBergen distributes specialty, brand-name, and generic pharmaceuticals in the United States and abroad. The company reported third adjusted EPS of $1.85 on sales of $45.37 billion. Both figures outpaced analysts' estimates and grew 5.1% and 0.3%, respectively, from the June 2019 quarter. Management also lifted the company's EPS guidance range to between $7.80 and $7.95 from its previous forecast of $7.35 to $7.65. The shares yield 1.64% and are trading nearly 25% higher over the past three months as of Aug. 17, 2020.
The stock has consolidated in a tight range over the past four weeks, finding support from the rising 50-day SMA. Active traders may decide to wait for a cross of the MACD indicator above its trigger line to generate a buy signal before committing capital. Those who take a trade should think about using a trailing stop to bank profits. To implement this strategy, place an initial stop under the July 31 low and raise it under each higher swing low until stopped out.
Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.
Disclosure: The author held no positions in the securities mentioned above at the time of publication.