CTRX stock is experiencing a large 4.02% drop today with very high volume confirming the weakness. The stock technical's are deteriorating. 5day EMA has dropped below 13 day, MACD is also tending lower, stochastics are registering overbought, and stock is now below it's 50 day SMA.
This is happening against a backdrop of the overall SPX market increase today of .53%, high officer and director insider sales, accompanied by a similar movement by institutions. Also worrisome is the expectation, by many, that the market will soon pullback by 5-10% sometime between now and the replay of the Washington DC thriller horror movie " Sequestration " at the end of February. A low beta stock could expect to experience a ratable retrenchment, higher beta issues have exaggerated movements up in good times and down during pullbacks. The previous round of brinksmanship resulted in a drop of CTRX stock from a high of $ 50.01 on November 12, to a low of $ 45.43 on November 15. The stock did not exceed the November 12th level until December 17, attaining a decisive upward breakout only on January 7, arguably buoyed by an overall market rally.
This is the basis of my conclusion that $ 47.65 200 day SMA-$ 48.11 150 day SMA is a better risk/reward adjusted price to add to my position, until the market passes to the other side of an overdue pullback. The cause of the broader drop may result from either technical market dynamics, or the avoidable pain inflicted by our elected leaders.
Comments and alternative views based on fact or precedent welcome.
Cautionary note was reinforced by CEO comments in earning call that Cigna might not renew it's contract with CTRX. Additionally, trailing quarter earnings exceeded forecast, 2013 profit/revenue projections were below the street's expectations. These two concerns resulted in a 3.22% drop in the stock..The stock technicals' remain challenged. CTRX is now trading below the 20 and 50 day SMA, MACD continues to trend lower, the slow and fast stochastic are short term bearish, as is the Commodity Channel Index. This near term negative bias is confirmed by unusually high volume on declining share price, and officer/director insider selling of 1,165,660 shares at prices averaging $ 48- $ 49.
CTRX is a quality company with good medium and longer term prospects, however for the reasons articulated above represents a high risk to add to positions, near term, at price levels exceeding $ 47.65- $ 48.11.
Excellent analysis. The looming battle over sequestration at the end of February and associated uncertainty over government spending could have an exaggerated impact on Catamaran, given it's reliance on " Zynchros, which provides a suite of formulary management tools to help payers manage their formulary programs and to maintain Medicare Part D compliance in their programs."
I believe your targeted risk adjusted price for acquiring addition stock of $ 47.65- $ 48.11 is reasonable.