CBS Corporation (CBS) is tapping into a younger demographic profile with its highly-regarded "Star Trek: Discovery" series, forcing Trekkies and other sci-fi fans to buy monthly subscriptions to the traditional broadcaster's All-Access streaming service. That's good news for shareholders, who have watched the stock lose significant ground since posting an all-time high near $70 in April.

The "House That Paley Built" needs All-Access to work because millennial cord cutting has taken a big bite out of revenues in recent years. Significant challenges remain because an older and less technically proficient crowd dominates long-term viewership, making the limited service a tough sell compared with the massive libraries of Netflix, Inc. (NFLX) and, Inc.'s (AMZN) Prime service. In addition, other networks including Fox and TBS now allow viewers to access their content free of charge. 

CBS Long-Term Chart (2005 – 2017)

The company's current incarnation began as a 2005 Viacom, Inc. (VIAB) spin-off, opening in the mid-$20s in the fourth quarter. It turned sharply higher in 2006, grinding out a trend advance that reached the mid-$30s in July 2007. An intermediate downturn accelerated during the 2008 economic collapse, cutting through the IPO print before settling at an all-time low just above $3.00 in March 2009.

It took more than three years for the subsequent bounce to complete a 100% retracement into the 2007 high, generating five months of narrow range action, followed by a breakout that posted healthy gains into the March 2014 high at $68.10. The stock completed a head and shoulders top with a neckline at $55 and broke down a few months later, entering a correction that posted lower highs and lower lows into September 2015, when it bottomed out in the upper $30s.

The subsequent recovery wave completed a round trip into the 2014 high in April 2017 and broke out, posting an all-time high at $70.10 and reversing in a bearish failure that has relinquished nearly 19 points in the past seven months. The stock is now trading less than two points above the deep low posted earlier this month, trying to build a basing pattern that supports a sizable bounce. Meanwhile, the monthly stochastics oscillator has dropped to the deepest oversold reading since 2008. (See also: The Contrarian: Does CBS Make Money or Not?)

CBS Short-Term Chart (2014 – 2017)

The decline into the third quarter of 2015 found support at the top of the 2012 high in the upper $30s, while the bounce into 2017 carved a series of pullbacks that have built support in the low $50s. Meanwhile, the decline into November 2017 reached the 50% retracement of the prior rally wave, offering a perfect position for the resumption of significant buying pressure. The stock has just posted the highest volume buying days since 2014, even though price has barely budged.

On-balance volume (OBV) ended a significant distribution phase in October 2015, while subsequent accumulation failed to reach the prior high during the second quarter breakout, generating a notable bearish divergence that presaged the subsequent reversal. The indicator has lifted to the highest high since 2014 in reaction to recent buying pressure, marking a bullish divergence that predicts sharply higher prices in coming months.

Lower highs since September have carved a trendline that will issue a buy signal when the stock breaks out above $58. Conservative market players may wish to use that event to get on board, while less risk-averse traders may build positions much lower in the pattern in expectation that the Nov. 3 low won't be challenged. For obvious reasons, the more aggressive strategy requires a stop-loss just under that level. (For more, see: CBS Corp. Beats on Q3 Earnings, Sales Lag Estimates.)

The Bottom Line

CBS stock has been losing ground since April, but the decline has now reached major support while deeply oversold long-term technical readings predict the start of a buying cycle that generates superior gains. (For additional reading, check out: CBS, Dish Agree Carriage Terms; Blackout Ends.)

<Disclosure: The author held no positions the in aforementioned securities at the time of publication.>