It is always dangerous to blindly follow the herd, but the consensus among the analysts is that Cerner Corporation (NASDAQ:CERN) remains a strong buy, and on this occassion, I agree with them, which is unusual. There are several reasons for my opinion.
First, the recovery in the stock price from the start of the year has seen some classic volume price analysis relationships at work with Wyckoff’s third law in evidence. Here we see the effort and result in agreement with steadily rising prices supported by steadily rising volume as the price of the stock recovered off the lows of $48.78 to move to test resistance at the $58 price level, denoted with the red dashed line of the accumulation and distribution indicator. As this level was tested, note how the market makers stepped in on candles 1 and 2, buying into the weakness. Notice also how the selling pressure then diminishes, until we see the sharp move higher on extreme volume, which also triggers the volatility indicator. Since then further positive signals have followed, in particular, last week’s price action supported with excellent volume as the stock breached resistance in the $65.50 area as denoted by the red dashed line immediately above the volume point of control in yellow.
So where next for Cern, and here two things are key. First, we need to see the price continue to break away from the volume point of control (VPOC) on rising volume and clear the top of the volatility indicator in the $66 area but expect to see some consolidation first. Once through here the $67.57 level of August last year becomes the next objective, and finally, if this is taken out, a longer-term return to the $74 area. The region from $66 to $74 is also key for another reason, as volumes on the VPOC indicator are falling away the higher we move, thereby presenting less resistance to the advance which is confirmed with the trend monitor below.