Walgreens Joins the Dow, Reports Earnings Thursday

Walgreens Boots Alliance, Inc. (WBA) is the country's largest corner drug store, selling prescription and over-the-counter drugs, with many aisles of typical five-and-dime merchandise. The drugstore chain serves Americans living in the rural U.S. and on Main Streets in major cities and their suburbs, and it has a presence around the world.

The stock closed Monday, June 25, at $67.24, down 7.4% year to date and up 9.2% since setting its 2018 low of $61.56 on May 8. The stock is in correction territory at 16.7% below its Jan. 29 high of $80.68.

The drugstore stock replaced General Electric Company (GE) in the Dow Jones Industrial Average after the market close on Monday. Walgreens has a dividend yield of 2.56%, which is below the yield of all eight of the 2018 "Dogs of the Dow." Analysts expect Walgreens to report earnings per share of $1.47 to $1.52 when the company releases results before the opening bell on Thursday, June 29. The biggest growth potential continues to come from Medicare Part D and increasing sales of prescription drugs. (See also: GE's Removal From Dow Good for Investors: Goldman.)

The daily chart for Walgreens  

Walgreens has been below a "death cross" since June 22, 2017, when the stock closed at $76.37. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving and indicates that lower prices lie ahead, and this was the case for shares of Walgreens. This tracked the stock to its 2018 low of $61.56 set on May 8. At the base of the chart is a horizontal line at $62.46, which is this week's value level. Note that the June 21 high of $68.86 was a test of the higher horizontal line at $62.82, which is my quarterly risky level. This was tested in reaction to the announcement that Walgreens would replace GE in the Dow 30.

The weekly chart for Walgreens

The weekly chart for Walgreens is positive, with the stock above its five-week modified moving average of $65.63. The stock is below its 200-week simple moving average of $78.68, which is the "reversion to the mean," last tested during the week of Feb. 2, when the average was $78.97. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 49.69 this week, up from 37.07 on June 22.

Given these charts and analysis, investors should buy Walgreens shares on weakness to my weekly value level of $62.46 and reduce holdings on strength to my quarterly risky level of $68.82 and the 200-day simple moving average now at $69.74. (For more, see: 7 Reliable Stocks for an Uncertain Market.)