ASX Trader: CSL stock’s in free fall and now is the best time to buy
This healthcare juggernaut’s stocks are in free fall, but there’s a lesson here. Buy broken charts, not broken businesses, writes ASX Trader
They laughed when I said CSL was in distribution back in 2023.
After all, how could one of Australia’s most admired companies, a global healthcare giant possibly be heading for a major correction?
Yet here we are.
The stock has done exactly what the charts warned it would.
And just as few believed the top two years ago, I guarantee most won’t believe that this correction is healthy, a natural mean reversion that’s bringing CSL back to fair value for the first time in over a decade.
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The Setup: From market darling to market doubt
CSL has long been hailed as one of the greatest success stories on the ASX.
Over the past few decades, it’s transformed into a global healthcare powerhouse and a consistent wealth generator for investors.
Yet even the strongest stocks move through distinct phases which are accumulation, uptrend, distribution, and decline and right now, CSL appears to be deep in the latter.
Just as few believed the top two years ago, many will struggle to recognise the bottom when it arrives. That disbelief is what creates opportunity.
Divergence between price and performance
CSL’s share price has fallen from around $340 in 2020 to near $170 today.
On the surface, that looks like a dramatic fall from grace but the fundamentals tell a very different story.
In 2020, CSL earned roughly $4.80 per share. Fast forward to today, and earnings per share have climbed higher than that even as the stock price nearly halved.
This is what technical analysts call divergence when a company’s earnings rise while its share price declines. It suggests sentiment, not substance, is driving the fall.
From Perfection to value
Back in 2020, CSL was trading on a price-to-earnings (P/E) ratio above 50, a level that reflected near-perfect market expectations.
Fast forward to today, with the share price hovering around $170, that multiple has compressed to below 20 which is a clear re-rating back toward value.
It’s true that CSL is no longer the high-growth juggernaut it once was.
Management now forecasts 4–5 per cent sales growth for FY26 and NPATA growth of 7–10 per cent, reaching roughly US$3.45–3.55 billion.
Analysts had previously pencilled in 7–15 per cent NPATA growth, so this guidance was notably softer.
In the short term, such revisions tend to rattle confidence. Over the long term, however, they often mark the point where expectations reset, and valuation reconnects with fundamentals.
Despite this moderation, CSL remains a highly profitable enterprise.
Its earnings per share continue to rise, and for the first time in more than a decade, the stock is trading at genuinely attractive value levels rather than at a premium built on hype.
For long-term investors, that’s precisely where opportunity begins.
The business itself hasn’t broken. Its revenue continues to grow, its earnings are increasing, and its global operations remain robust.
What’s changed is market sentiment, the one ingredient that turns strength into opportunity.
The Technical Picture: Where buyers will return
Every long-term winner eventually hits a point where even loyal investors lose faith.
For CSL, the likely bottoming zone sits between $130 and $170.
Traders and investors should watch for a confirmed change of trend in this area when the downtrend finally reverses to an uptrend in that range.
That’s the technical signal that the market has finished punishing the stock and is ready to reward it again.
Technically, CSL hasn’t been this oversold in decades.
The monthly RSI currently sits near 28, a level not seen since 2002, when the stock fell from around $17 down to $4 before beginning a multi-year bull run that turned CSL into one of the ASX’s greatest long-term performers.
History doesn’t repeat perfectly, but it often rhymes, and the setup now looks strikingly similar.
I posted the same setup about Fisher & Paykel Healthcare (FPH) back in 2022, when it was sitting in what I called the ZAG zone.
At the time, few believed it would recover, but the structure was clear, it was a textbook retracement in a top-quality healthcare business.
Sure enough, FPH re-rated strongly once the selling exhausted itself.
The same logic applies here.
Top-quality healthcare stocks don’t go down forever, they get accumulated at key levels. Right now, fund managers are likely licking their lips at this opportunity.
The Macro Context: Healthcare’s hidden tailwind
Looking beyond CSL, the broader healthcare sector is also historically undervalued.
When compared to the S&P 500, U.S. healthcare is trading at support levels not seen since the tech bubble in 2000, a point that marked a major cyclical low.
The sector has been one of the worst performers since 2020, but as every market student knows, markets move in cycles, and this one is now deep into its reset phase.
From 2026 onwards, that cycle is expected to turn, with healthcare historically beginning to outperform during the late stage of an expansion and the early stages of a bear market.
On key sector ratio charts, healthcare stands out as one of the most undervalued corners of the market, quietly building the base for its next major upswing.
The Lesson: Sentiment creates opportunity
Great investors know the best time to buy is when strong businesses are out of favour.
When emotion overshadows logic.
When charts look broken, but businesses don’t.
CSL isn’t a speculative play or a turnaround story.
It’s one of the top 10 companies on the ASX, with deep moats, growing earnings, and global scale. It’s not going anywhere.
So if the chart finally turns up from the $130–$170 zone, remember:
Buy broken charts, not broken businesses.
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