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Rite Aid Corporation (NYSE:RAD): May drop to $4.75 in coming weeks – exit

Boston, MA 09/17/2014 (wallstreetpr) – Rite Aid Corporation (NYSE: RAD) (Closed: 6.41, Down: 0.16%) is going to announce its Q2’15 result on Thursday and the anticipation has frozen the price in the narrow range of $6.10-$6.62 for the last six weeks. Now that only a single day remains before the result is released, the indecision of the market participants is clearly reflected in the Doji candle formation on Tuesday. The volume has almost dried up at 29.5 million against an average of 26 million.

Technically, the picture doesn’t look very promising for the stock. It is one of those fallen angel that had its best period of life in the 1990s and then lost it all. The life high was made at $51.13 in 1999 and the subsequent crash took it to $1.50 within 2000. The attempts to bounce failed to take it beyond $10 and the series of lower highs and lows remained in force, depicting the huge long term downtrend. The final low came at $0.20 in 2009, the origin of the last and the best rally in more than a decade.

The current rally has made a high at $8.62, far above the 2007 top of $6.74, registering the first higher high since 1999. While it must be taken as a half-signal regarding the turnaround of the secular bear trend, it may also be assumed that the high for the year 2014 has been made and any new high above $8.62 may not be seen in the coming 3 months, if not longer.

The channel containing the entire rally from the 2012 bottom of $0.95 to the 2014 high of $8.62 is broken now. The weekly chart shows a clear Head & Shoulders pattern and with the volume pattern suggesting higher selling pressure from the top, a failure to break above $6.62 immediately may result in a breakdown below $6.22 in the short term and below $5.85 in the medium term, triggering a major fall towards $4.75-$4.50. Investors may exit this stock.

Published by Viraj Shah

Viraj Shah has done M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.

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