Walgreen Tested Resistance of 4-Month Range on Earnings Beat

Walgreen

reported earnings on Tuesday before the opening bell. The company said its net income dropped to $683 million, or 78 cents per share, in the three months that ended Feb. 29. That compares to $739 million, or 80 cents per share, a year ago. Revenue climbed less than 1 percent to $18.65 billion from $18.5 billion a year earlier. Analysts surveyed expected, on average, earnings of 77 cents per share on $18.57 billion in revenue. Price action on WAG has been choppy and trading in a 10% range between $32.50 and $35.50. The stock price shot higher on the better than expected earnings, testing resistance immediately on the high end of the 4-month range. A close above the $36.25 level would confirm a breakout to the upside. Resistance is seen near the 50-week moving average at $36.18, along with the 200-day moving average at $35.05. Support on the drug store chain is seen near the 20-day and 50-day moving average at $33.65 and $33.40 respectively. The RSI (relative strength index) has moved to the higher end of the current range and closed near 60. The RSI has remained below the overbought level of 70 and above the oversold level of 30 for the last 6-months, which shows the tightness of the current trading range. The MACD index moved into positive territory, as the indicator created a buy signal last week. The signal is where the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. This signal generally reflects increasing positive momentum for price action. Volume on the stock price has declined, beginning in January, and has continued to remain below the 50-day moving average of volume for the past 2-weeks. Observing increasing volume on the breakout or break down would be a confirmation of that the current range is broken.