3SOF

Profile:

Omnicare, Inc. (Omnicare) is a geriatric pharmaceutical services company. The Company operates in two segments: Pharmacy Services and Contract Research Organization Services (CRO Services). The Company provides pharmaceuticals and related ancillary pharmacy services to long-term healthcare institutions. Its clients include primarily skilled nursing facilities (SNFs), assisted living facilities (ALF's), retirement centers, independent living communities, hospitals, hospice, other healthcare settings and service providers. Omnicare provides its pharmacy services to long-term-care facilities and other chronic-care settings comprising approximately 1,392,000 beds in 47 states in the United States, the District of Columbia and in Canada at December 31, 2007. It also provides operational software and support systems to long-term-care pharmacy providers across the United States. In addition, it provides pharmaceutical distribution and patient assistance service for specialty pharmaceuticals.

Fundamentals:

OCR beat expectations on their recent Q2 resultshttp://www.genengnews.com/news/bnitem.aspx?name=39588606 and raised guidance. Hey look this is not an overly exciting market segment, but after a period of relative poor performance the company seems back on track and delivering on expectations and gaining positive market sentiment as a result. They have very high institutional ownership and a market cap of $3.5B. The company has good cashflow and re-purchased $100M of their own shares in the quarter at an average price of around $24.40.

Technical & Trade Plan:

OCR has been trading in an ascending channel since bottoming out in March 2008. Their recent earns release powered the stock up on good volume to the top of the trading channel and through descending resistance, where it encountered further resistance in the shape of an historic trading gap created on Oct 31st 2007 (that gap starts at $31 ish).
Now OCR is consoidating and creating a bull flag continuation pattern just below the gap. The set-up allows a controlled standby trade plan to be initiated. The plan will be to enter OCR on the break of the ascending channel (which is coincident with the start of the Oct gap). A breakout here should see it quickly fill the gap which would be at $34. That would be a first target area if the pattern plays out our stop would be a failure of the flag after breakout, this allows a good risk to reward construction.

Trade Plan:

Buy OCR if it trades at or above $31.15

Update:

Remove standby trade plan for OCR. The price drift these past few days means the upper channel (see chart in original post) will act as immediate resistance to the original flag breakout idea.