Walgreen is a stock I first studied back in the middle of 2019, May 1st to be precise with a post titled ‘Walgreens boots are red’ and where the weekly chart sending a strong signal of further selling which duly took this stock to a low of $33.36 per share towards the end of last year. Since then we have seen the price recover, but it is a journey punctuated with volatility and reversals, and the reason I’m looking at it now is that it has been tipped by Deutsche bank as one to watch with an initial target of $55 per share. So is there some optimism for this view?
There are several points on the chart which will help to answer this question. First, note the candle of three weeks ago and the associated volume. This is an anomaly. Why? Because here we have a widespread up candle which is extreme and one of the biggest on the chart, yet note the volume. Mediocre would be a good description. Note also the following week’s candle where we have a deep wick to the upper body which is a great signal and an example of weakness to come which has duly played out to date. Next, we have a strong level of price-based resistance overhead just beyond the $55 per share region and denoted with the red dashed line of the accumulation and distribution indicator. This level was also tested back in January with the volatility candle with the two purple triangles, one top, and one bottom, with the expectation of a trap move coming. Why? Because the volume here is well below what we might expect for such an extreme move, and the depth of the wick is self-evident, not a sign of strength which was duly validated. Finally, if we look back even further to March last year we have a failure at the current resistance which resulted in the stock moving back to the volume point of control where it was in congestion for a period of time.
To summarise, the recent attempts to move this stock higher have failed and in addition, look anomalous. So, in my humble opinion, the stock looks quite toppy at the moment, and is not one I would be confident to say is on a longer-term upwards trend. However, if and when the $55 per share level is breached on good volume then this would of course provide a good platform of support for a move higher.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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