Express Scripts: A Prescription for Higher Prices

August 14, 2014 12:19 PM

Express Scripts, $ESRX, is in the business of pharmacy benefit management services, so the company deals with a lot of prescriptions.  I am not a doctor, but as a technical analyst I have a prescription for the stock price: Higher.

The chart above shows the price action since the top in mid-March at 79.37.  Since then it has traced out a bearish Bat harmonic pattern.  At the completion of the pattern at point D near 77.69, the down side reversal could trigger according to the pattern.  But that is a long way from the current price at 72 and change.  And what if the pattern fails and it just keeps going higher? The previous top at 79.37 is not far off then.  The momentum indicator RSI is strong and the stock is still under accumulation.  These support the upside.  I embrace this type of mosaic where indicators and two different methods of technical analysis all point in the same direction.  

The key to managing risk is the recent break over point B.  Using a stop under that at say 71, gives the potential reward of $5 to $7 against $1 of risk.  A pretty good ratio.  I bought some today at 72.30.

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