After two days of sharp gains, Rite Aid Corporation (NYSE:RAD) had a comparatively quiet session yesterday with a marginal loss of 0.8% though it registered a new 52 week high in the opening minutes. The volume of 30 million was exactly at par with the average volume. The company will report its 4Q15 this month and currently the analysts on the street are going through a preview.
According to the guidance earlier provided by Rite Aid Corporation (NYSE:RAD), the EBITDA can be expected to come anywhere between $295 -$325 million, very close to the figure of $310 million projected by UBS though a figure of $333 million would not be too surprising. The result is expected to be good for another reason which is the consistent, sequential growth seen in its EBITDA in the fourth quarter of every year, caused by a higher number of people suffering from cold due to the cold water in the last quarter, leading to higher sales of the drugs of the company.
Then there is the rumor of Walgreens, the largest pharmacy chain in the US, planning to buy RAD out is going on, which is also pushing the price higher. It is also fuelled by the fact that Walgreens is in an acquisition spree and may not stop that soon.
Technically, there is no obstacle for the stock before $10 levels, which is the lower boundary of the strongest supply area. As the chart shows, the band of $10-$12 has a lot of trapped long term investors waiting for the price to reach their purchase price so that can unload their holdings. The volume pattern shows a lot of buying interest in the last 2 years but it remains to be seen if they can absorb the selling pressure from the higher levels.