Novartis chart may soon 'complete a well-defined bullish reversal,' Cappelleri says
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Novartis reported earnings a few days ago and, so far, has done a good job holding near its recent highs. As a result, the stock continues to press against the neckline of a large potential inverse head-and-shoulders pattern, shown below. If NVS can continue consolidating near current levels and then break decisively above resistance, the pattern would trigger an upside target near $176. While that may not represent a huge percentage gain, it would complete a well-defined bullish reversal following the stock's lengthy consolidation. As always, the focus is on reward versus risk. A stop-loss near 151, close to the bottom of the pattern's right shoulder, provides a favorable setup from that perspective. Zooming out to the weekly chart, NVS has done a good job since the spring of 2025 of holding above its rising 40-week moving average, which closely aligns with the 200-day moving average. At the same time, the 14-week RSI has remained above a key 50 midpoint, confirming the strength of the longer-term trend. After spending nearly two years consolidating, the stock broke out in the second half of 2025 and has since advanced through a series of healthy consolidations. From its late-2024 low, NVS has rallied roughly 50%, raising the natural question of how much upside may still remain. The key isn't necessarily another extremely overbought RSI reading. Instead, as long as the RSI continues holding near 50 while the stock makes higher lows above the rising 40-week moving average, the longer-term uptrend remains intact. A good historical comparison occurred between late 2012 and mid-2015. During that stretch, NVS consistently held above its rising 40-week moving average while the 14-week RSI oscillated between 50 and overbought territory. That combination helped fuel an advance of roughly 80%. More importantly, the trend also showed us how bull markets end. In the summer of 2015, NVS broke below the 40-week moving average, which flattened and eventually became resistance. At the same time, the 14-week RSI fell below 50. Those signals together confirmed that the stock's character had shifted from a sustained uptrend to a downtrend. Going forward, those remain the key indicators to monitor. As long as NVS holds above its rising 40-week moving average and the RSI remains near or above 50, the longer-term trend deserves the benefit of the doubt. NVS trades largely outside the most widely followed U.S. ETFs. As a foreign ADR, it is absent from SPY , QQQ , and PJP . Instead, its largest ETF exposure comes through healthcare-focused funds, most notably the VanEck Pharmaceutical ETF (PPH), where it is the second-largest holding. As the relative chart below shows, NVS has outperformed PPH since early 2024. That leadership hasn't been linear, however. Several periods of relative weakness have occurred along the way, yet each pullback has produced a higher low in the relative strength line while the 14-week RSI has remained above 50. Most recently, NVS has again lagged PPH over the past few months. If the longer-term relative uptrend is going to remain intact, we'd expect another relative bounce from current levels and, ultimately, another move to new relative highs. The bottom line is that NVS appears to be on the verge of a short-term breakout, but that's only part of the story. More importantly, the stock continues to maintain a well-defined long-term uptrend, both on an absolute basis and on a relative basis versus pharmaceutical peers. —Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.