Amazon just made a bet on the retail pharmacy business and Walgreens stock took a big hit.
Walgreens shares plummeted nearly 10 percent on Thursday in their worst daily performance in nearly three years.
Its technical picture has been a mess long before Amazon's deal for PillPack, says Craig Johnson, chief market technician at Piper Jaffray.
“You’ve actually been in a downtrend for a number of years. In fact, you’re about 39 percent off the highs, you’re down about 21 percent year to date and you’re now taking out key support around $62,” Johnson told CNBC’s “Trading Nation” on Thursday.
Walgreens closed below $62 on Thursday for the first time since October 2014.
“You’ve got some short-term support that will come in around 3 percent lower than where we are now at around $58, but then after that you don’t have any support until about $50,” said Johnson.
A close below $50 has not occurred since September 2013. Such a move would mark a 40 percent decline from its 52-week high set last September.
“This isn’t a stock I’m going to be ready to buy yet. I need to see some sort of consolidation and basing to take place,” Johnson said.
Its fundamental picture isn’t looking much better to Mark Tepper, president at Strategic Wealth Partners.
“All retail pharma has had to deal with discounting generics, but the impact on Walgreens’ bottom line has been much more negative than for companies like CVS,” Tepper said on Thursday’s “Trading Nation.” “Management has really been trying to focus on front-of-store sales, which is really high-margin business, but that’s been lagging as well and it’s actually down year over year.”
Comparable pharmacy sales came in flat over Walgreens’ recent quarter, while comparable retail sales dropped 3.8 percent.
“We’d be avoiding it. Even before the Amazon news, we’d be avoiding it,” said Tepper.