Like Finding a Coiled Spring Ready to Pop
With the Federal Reserve entering into a rate-cutting cycle, it’s hard not to be bullish on the market despite a massive runup we’ve witnessed recently.
When stocks are soaring it’s easy to get FOMO.
After all, no one wants to feel left behind.
However, I’ve learned that chasing moves isn’t what gets me paid in this market.
For me, it’s all about the setup.
And there’s one I want to tell you about today, that I feel is ripe for a move higher.
The company I want to bring to your attention is Cardinal Health (CAH).
Cardinal Health is a key player in the healthcare industry, serving as a vital link between manufacturers and healthcare providers. They distribute pharmaceuticals and medical supplies to hospitals, pharmacies, and clinics worldwide.
Additionally, Cardinal Health produces its own line of medical products. Their role is crucial in ensuring that healthcare facilities have the necessary supplies and medications to treat patients effectively and efficiently.
The company’s recent Q4 and FY24 earnings exceeded expectations, with revenue up 12% and gross margin up 5%, driven by strong performance in both pharmaceutical and medical products segments.
Shares are up modestly in 2024, underperforming the overall market, up just 10.5% year-to-date.
But it’s setting up for potentially a higher move.
Here’s why
Fresh Daily Squeeze:
Let’s talk about something traders call a “squeeze” – it’s like when a stock decides to take a breather and gets real quiet for a bit.
You can spot it on a chart when those Bollinger Bands start hugging each other so tight they actually sneak inside the Keltner Channels.
It’s pretty cool when you see it pop up on a daily chart – that’s what we call a “New Daily Squeeze.”
My Daily Profits Scanner identifies these for me, so you don’t have to be a chartist to find these.
Now, imagine the stock is like a rubber band being stretched. The longer it stays quiet, the more tension builds up. When that tension finally snaps – boom! The price can shoot off like a rocket, up or down.
Here’s the fun part for traders: they watch this squeeze like hawks, waiting for the moment it breaks. As soon as the price starts moving, they jump in, riding the wave up if it’s going up, or surfing it down if it’s dropping.
It’s a neat trick for finding trades that could pack a real punch, whether you’re looking at stocks, currencies, or whatever else catches your eye in the market.
Stacked Daily EMAs (Exponential Moving Averages):
Picture EMAs as trendspotters that pay extra attention to what’s happening lately in the market. When we talk about “stacked” EMAs, we’re looking at a bunch of them with different time horizons – like 8 days, 21 days, 50 days, and even 200 days.
Now, when these EMAs line up in a certain way, it can tell us a lot about the market’s mood.
Imagine them as a staircase. In a bullish market, you’d see the shortest EMA at the top, then the next longest one below it, and so on, with the longest EMA at the bottom. The current price? It’s hanging out above all of them, like the cherry on top.
So it might look something like this:
Current price > 8-day EMA > 21-day EMA > 50-day EMA > 200-day EMA
When you see this pattern, it’s like the market is giving you a thumbs up.
It’s saying, “Hey, things are looking good across the board – from the very recent past all the way back to the long-term trend.” It’s a sign that the upward momentum is strong and consistent, no matter which timeframe you’re looking at.
A Move To The Highs?
With the market at its highs, investors might look for stocks underperforming to play catch up.
If that’s the case, it should help CAH.
Its 2024 highs are $116.05, which isn’t that far away, but like I mentioned earlier, the stock has underperformed the overall market.
Your Action Plan:
I currently don’t have a position in CAH. However, it’s one I’m watching for a potential long play. If I do decide to trade it, I will use call options to express my position.
This allows me to capture the potential upside while limiting my risk.
Finding high quality setups like this one doesn’t have to be hard if you have the Daily Profits Scanner.
