A rectangle pattern has emerged in the chart of McKesson Corp. (MCK). When the pattern is broken, a breakout or a breakdown is expected.
MCK is the largest leading third-party logistics provider. The company is engaged in wholesale pharmaceutical and medical products sourcing, distribution and dispensing, contract manufacturing, and related IT services to acute care hospitals and health systems, independent and chain retail pharmacies in North America, Europe, and Canada.
MCK had a strong fiscal third quarter outperforming estimates. In November, the company completed the contribution of its German wholesale business to a joint venture with Walgreens Boots Alliance (WBA). It also introduced Ontada, an oncology technology and insights business in its U.S. Pharmaceutical segment.
The company had $3.6 billion in cash and cash equivalents as of the end of the year, compared with only $929 million in short-term debt. MCK has a stable history of revenue growth and is expected to increase revenue 4.1% this quarter. Earnings are forecasted to rise 16.9% in the current quarter.
The stock is trading at a low multiple with a trailing P/E of 14.38 and a forward P/E of 9.96. It has an overall grade of A, which translates into a Strong Buy in our POWR Ratings system. It has shown mixed performance so far this year, but has been trending up recently.
Take a look at the 1-year chart of MCK below with added notations:
After the November surge, MCK moved into a sideways trading range. While in the range, the stock has formed a resistance level at $187.50 (red), and a level of support at around $170 (green), creating a rectangle pattern. At some point, the stock will have to either break the resistance or the support.
The possible long position in MCK is on a breakout above $187.50. The ideal short opportunity would be on a break below $170.
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MCK shares were trading at $186.66 per share on Monday morning, down $0.89 (-0.47%). Year-to-date, MCK has gained 7.59%, versus a 5.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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