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.
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.
Disclosure: The author held no positions in the securities mentioned above at the time of publication.