Quest Diagnostics Incorporated (DGX) remains in bear market territory but is in recovery mode as it modernizes and expands to provide phlebotomy services across the country. The stock is in the midst of a recovery – it closed Monday, Feb. 11, at $88.25, up 6% year to date and up 11.8% since trading as low as $78.95 on Dec. 26. Even so, the stock is in bear market territory at 24.2% below its all-time intraday high of $116.49 set on June 25, 2018.
Quest reports quarterly results before the opening bell on Thursday, Feb. 14, and analysts expect the company to post earnings per share of $1.36. Fundamentally, the stock is reasonably priced with a P/E ratio of 14.07 and a dividend yield of 2.38% according to Macrotrends. Where I live in Tampa Bay, Florida, Quest is expanding, adding laboratory facilities and relying more on technology to book appointments. Patients make an appointment online and enter a code into a computer screen when they arrive at the lab.
The daily chart for Quest Diagnostics
The daily chart for Quest shows the formation of a "death cross" on Oct. 11, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. This warning was in play at the Dec. 26 low of $78.95. This day was a "key reversal," which helped the stock rebound. The downside since the high of $116.49 set on June 25 accelerated on price gaps lower following earnings reports released on July 24 and Oct. 23.
The 2018 close of $83.27 on Dec. 31 was input to my proprietary analytics and resulted in three horizontal lines. My annual, quarterly and semiannual risky levels are $93.81, $105.03 and $111.41, respectively. The Jan. 31 close of $87.35 resulted in my monthly pivot for February at $88.18. My weekly value level is $85.56. Notice how my monthly pivot at $88.18 held at Monday's low of $88.20.
The weekly chart for Quest Diagnostics
The weekly chart for Quest is positive, with the stock above its five-week modified moving average of $87.54 and failing at its 200-week simple moving average, or "reversion to the mean," at $89.23. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 39.52 this week, up from 33.94 on Feb. 8. As 2019 began, the stochastic reading was 8.87, with a level below 10.00 making the stock "too cheap to ignore."
Trading Strategy: Buy Quest Diagnostics shares on weakness to my weekly value level at $85.56. If my monthly pivot at $88.18 holds, the upside potential is to my annual, quarterly and semiannual risky levels at $93.81, $105.03 and $111.41, respectively.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.