For six months, Express Scripts has worked upwards, defining a clear up-trending channel. Over the past month, ESRX has traded within a tight sideways trading range.
Looking at the volume bars, I see periodic spikes of volume on up-close days (the green volume bars below). The almost regular spikes strongly suggest institutional accumulation is going on.
Notice that after each time the stock was either quiet or sold off, the first above-average volume spike on an up-close day nearly always led to further gains within the next few days. These were usually extended moves of several percent.
ESRX could exit from the current tight trading range in either direction. The high volume spike five days ago, coming off the bottom of the range, and the previous evidence of accumulation, suggests further gains, and a breakout upwards, is the more likely scenario.
I like to find additional tailwinds for all my trades. I look to seasonal track records for evidence the stock has drawn interest from institutions this same time of year in previous years. ESRX doesn't disappoint.
ESRX has risen an average 10.6% over the next 13 weeks, with gains in 16 out of 21 years. 12 of the gains were double-digits. This is pretty strong, albeit circumstantial, evidence that institutions, the major drivers of stock gains, repeatedly play a run-up in ESRX into the fall.
Express Scripts provides pharmacy benefit and healthcare management services. It will likely be playing a major role in the drive to cut healthcare costs in the future. Fundamentally, the stock is growing earnings at a 25% rate and has a 22% Return on Equity. It does not pay a dividend, and the next earnings release will be around July 29th.
Look for a continuation on the upside to enter, or wait until it closes above 64 on decent volume for confirmation of its intentions. It is very unlikely the institutions are done buying it for this year.
This would make an excellent stock-only trade. The near-term goal would be the 2012 high of 66.06, which would represent a 6.4% gain from the current price.
ESRX has actively traded options with tight Bid/Ask spreads, so covered calls and various directional option strategies, such as bull call debit spreads and bull put credit spreads should also do well.
The next six months have been very good to Express Scripts stock in the past. So far this year it looks like more of the same.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
Also on Market Tamer…
Follow Us on Facebook