Cardinal Health Slides 3.64% Amid Bearish Technical Signals And Death Cross Formation

Cardinal Health (CAH) concluded the most recent session with a notable decline of 3.64%, closing at $148.96. This marks two consecutive days of losses, totaling a 3.66% drop over that period. Trading activity was elevated, with volume reaching 3.16 million shares and the price oscillating between a high of $154.93 and a low of $145.87. This recent weakness serves as the focal point for the following technical assessment based on approximately one year of price history.
Candlestick Theory
Recent candlestick formations suggest short-term bearish control. The sharp decline on September 25th produced a pronounced bearish candle following a smaller indecisive candle the day before, indicating lacklustre buying after a prior strong up-day (September 23rd's 4.85% gain on high volume). This weak response off potential support near $147-$148 weakens that zone. Key resistance now appears established at the $154.60-$155 level (tested as resistance on 9/24 and acting as support/resistance pivot earlier), while significant swing low support lies near $146 (tested on 9/22, 9/19, 9/18) and more critically around the $137-$139 region formed in early August.
Moving Average Theory
The moving average configuration highlights a deteriorating intermediate and long-term trend. The 50-day SMA has decisively crossed below the 200-day SMA (a "death cross") within the past month, a bearish signal confirming a shift towards a longer-term downtrend. Furthermore, the price is currently trading well below all three key moving averages (50-day, 100-day, 200-day), indicating strong downside momentum and reinforcing bearish dominance. The 200-day SMA, approximating around $137-$138, now represents a significant long-term resistance level overhead, while the 50-day SMA near $152 acts as closer-term resistance.
MACD & KDJ Indicators
Both the MACD and KDJ oscillators reflect oversold conditions but lack convincing bullish reversal signals yet. The MACD line remains below its signal line and resides deep in negative territory, though the histogram shows a potential slowing of downside momentum (less negative bars recently). The KDJ indicators (K and D well below 20, J potentially below 0) similarly indicate extreme short-term oversold territory. While this suggests the decline may be due for consolidation or a minor bounce, both oscillators remain in bearish alignment without bullish crossover confirmations. This oversold state warrants caution against aggressive new shorts but doesn't yet signal a reversal. A key confluence point is developing where deep oversold readings meet the longer-term bearish trend signaled by the MAs.
Bollinger Bands
Volatility, as measured by Bollinger Band width, has expanded notably during the recent sharp drop, reflecting increasing selling pressure. The price is pressing against the lower Bollinger Band ($148.96 close is near the calculated lower band), which typically characterizes an oversold environment and can precede a short-term bounce towards the midline (which coincides with the falling 20-day SMA, providing resistance). The bands had been contracting somewhat during September before the recent expansion, suggesting the resolution was downwards. Sustained trading below the lower band is unusual and often corrected, but the underlying downtrend remains dominant. The confluence here lies with oversold momentum oscillators and the price at the lower band, heightening the potential for a near-term pause or relief rally.
Volume-Price Relationship
Recent volume analysis validates the bearish price action. The significant down days (September 25th and notably August 12th's -7.21% plunge on extremely high volume of 7.85 million shares) occurred on higher-than-average volume, confirming selling pressure. Conversely, notable up days like September 23rd also attracted high volume (4.2 million), suggesting significant buying interest was met and subsequently overwhelmed by sellers. While the latest down-day volume was elevated, it was below the peaks seen earlier in the decline, potentially suggesting diminished selling intensity at this immediate moment, though not sufficient to signal capitulation or reversal. The divergence lies in the lack of correspondingly high volume on rebounds to validate sustainable buying.
Relative Strength Index (RSI)
The RSI, calculated based on the standard 14-period formula, recently dipped below the oversold threshold of 30, registering around 27-29 on September 25th. This confirms the strong bearish momentum identified by other indicators. While RSI readings below 30 often precede a bounce or consolidation due to selling exhaustion, they are not infallible reversal signals, especially within a strong downtrend where oversold levels can persist. The RSI has not yet shown bullish divergence against the recent price lows (September 25th low saw a lower price than August 14th, but RSI didn't make a significantly higher low). Its oversold state adds to the confluence suggesting a potential short-term counter-trend move is increasingly likely, but sustained bullish momentum requires confirmation above 50 on improving volume.
Fibonacci Retracement
Applying Fibonacci retracement levels to the major swing high (around $168 on June 30th) and the subsequent significant swing low (near $137 on August 12th after the earnings-related drop) provides key reference zones. The retracement levels derived from this range are: $152.50 (38.2%), $157.50 (50.0%), and $162.50 (61.8%). The recent price action saw rejection near the 38.2% level ($152.50-$153), reinforcing its role as resistance. Current weakness is testing the area just above the 0% level ($137) again. A decisive break below $137 would open the door for further downside towards the June 2024 lows near $110. Conversely, any recovery attempt will likely face initial resistance at the recent $154-$155 level (also near the broken 100-day MA historically), followed by the stronger confluence resistance zone around the 38.2% ($152.50) and 50-day SMA. The $147-$148 zone acted as minor support recently and represents a minor hurdle on the way to stronger resistance levels.
Confluence Summary and Outlook
A strong confluence of bearish signals exists: the established Death Cross, price below all key moving averages, deep oversold momentum indicators confirmed by low RSI and price at the lower Bollinger Band, and volume confirmation on the primary downward moves. Resistance at $152.50-$155 (Fibonacci 38.2%, recent rejection point, proximity to 50-day SMA) is significant near-term overhead. Support near $146 is weak; major support remains the August low near $137-$139. While the weight of evidence points towards continued bearish control, the oversold readings across oscillators and Bollinger Bands combined with proximity to major support ($137) suggest a bounce or consolidation is increasingly probable in the immediate term (next few sessions). However, sustained bullish reversal requires overcoming the $155-$157 resistance zone, confirmed by strong volume and supportive indicator turnarounds. The absence of bullish divergence on RSI or MACD and the lack of high-volume buying off support so far temper aggressive bullish expectations currently. Continued failure below $155 keeps the overall trend bias bearish with $137 as the critical test of major underlying demand.