Express Scripts ($ESRX) has been trending steadily lower the last five months, dropping over 40% during this stretch, but more downside action could still be seen. Here’s why..
Sell the Rips
While Express Scripts has trended lower the last five months, it has done so within the framework of a well-mannered downtrend. Well-structured trends allow market professionals to time great entries by trading pullbacks within the trend.
In essence, every rally within a downtrending market becomes a selling opportunity by market professionals.
ESRX has dropped from over $60 a share to below $40, with each pullback leading to another round of selling pressure – and current strength in this stock presents another opportunity.
Confluence
ESRX is showing a confluence of resistance in the daily chart, which helps to confirm the sell opportunity.
First, the Oct. 10 high is $41.70, which coincides perfectly with the monthly Point of Control (POC) – the dotted red line.
In a downtrending market, every pullback to POC usually indicates an overbought price condition, which is a call to action for the bears.
In addition, price tested the 3rd standard deviation of the VWAP Bands indicator, creating a dual area of resistance.
If price breaks (and closes below) the Oct. 10 low of $39.95, we could see another round of key selling pressure ahead.
If this occurs, look to scale at these targets: $38.15, $34.55, and $30.05.
Key Levels for E-Mini’s
Here are the Key Levels to watch in the E-Mini’s for tomorrow’s market:
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