UnitedHealth Group (UNH) surged higher yesterday, adding to already strong gains this month. The gains above $145 this month represent a breakout from a five-month consolidation pattern. Prices have already reached their price target (taking the height of the pattern and adding it to the breakout point) but there is no resistance around and no momentum divergences to worry the bulls. What's next?
In this twelve-month daily chart of UNH, below, we can see that prices have climbed nicely from the January/February low, rewarding investors with shy of a 50% gain. The 50-day and 200-day moving averages gave buy signals very early in the move up, with closes above the averages in February and positive slopes in March. The golden cross of the 50-day and 200-day averages occurs in late March, which is not that far off the bottom. Dips in September, October and November never touched the rising, 200-day average line, but with hindsight, they proved to be buying opportunities. Volume and the On-Balance-Volume (OBV) line seem to be at odds. The volume histogram just below the price chart shows that volume has been increasing with the advance that started in September, but the movement of the OBV line is neutral -- at best. I'm not sure if that is a concern. The 12-day momentum study has been making higher highs along with prices, so no bearish divergence is evident from this leading indicator.
This three-year weekly chart of UNH, below, is an example of what technically oriented traders dream about -- a steady uptrend with all our indicators in gear on the upside. UNH has been trading above the rising, 40-week moving average line since February. Dips toward the rising moving average line in October and November were buying opportunities. The weekly OBV line has been moving smoothly higher for the past three years, signaling steady accumulation by investors -- with heavier volume being traded in the weeks when UNH has closed higher. In the lower panel is the Moving Average Convergence Divergence (MACD) oscillator. This trend-following indicator has been above the zero line since February, signaling a bull move, and a recent crossover gave us a fresh buy signal.
When a stock reaches its upside price objective from one technical approach -- for example, from a bar chart -- we usually turn to a Point and Figure chart to see if some longer-term target may be available.
With bar charts (charts 1 and 2), the approach is to take the height of a pattern and project it higher. With Point and Figure charts, the approach is to take the width of the consolidation and project that number to the upside after a breakout. In this long-term Point and Figure chart, above, a robust price target of $211 is indicated. Not bad. The chart remains bullish as long as support in the $144 to $134 area is not broken.