A year and a half ago, on October 20th, 2024, we wrote that the new CEO of CVS Health has been dealt a good Elliott Wave hand. The stock had erased more than ten years’ worth of gains and was trading back to 2013 levels. The company had just appointed David Joyner as its new Chief Executive with the mission to return the healthcare and pharmacy giant to profitable growth.
We had no insight into his managerial abilities, however. Instead, the reason we thought he could make it was the Elliott Wave chart below, which warned us about a bullish reversal ahead.
It revealed that the post-2015 decline in CVS stock was on the verge of completing an A-B-C flat correction. Waves A and B were both simple (a)-(b)-(c) zigzags, while wave (v) was the only missing piece of the five-wave impulse in wave C. According to the theory, once a correction is over the preceding trend resumes. Since CVS was clearly in an uptrend prior to 2015, it made sense to expect a rebound in the mid-$40s per share. Eighteen months later now, the updated chart below shows how things went.
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Wave (v) of C dragged CVS stock below $44, at which point the bulls decided that they’ve had enough. If this count is correct, the following recovery to over $85 so far must be a sequence of first and second waves within the ongoing uptrend. Since wave (ii) is not supposed to erase the entire wave (i), we can identify $58.50 as this analysis’ invalidation level. More gains in wave (iii) of 3 make sense as long as CVS trades above it, especially since at $77 a share the stock still trades at an undemanding P/E of 11.
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