Healthcare firm Centene (CNC) was cut to an "equal-weight" rating at Morgan Stanley (MS) Wednesday. In my February review of CNC I wrote that "The charts and indicators of CNC are pointed lower. Continue to avoid the long side of CNC." Let's review the technicals again and see how low prices may fall in the weeks ahead.
In the daily bar chart of CNC, below, I can see that the shares have declined the past 12 months. CNC has spent a lot of time below the declining 200-day moving average line. The shares have traded sideways since June and now trade below the negatively sloped 50-day moving average line.
The trading volume looks like it has been more active since February. The On-Balance-Volume (OBV) line has been weak the past year and suggests to me that sellers of CNC have been more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is bearish.
In the weekly Japanese candlestick chart of CNC, below, I see a bearish setup. Prices are in a longer-term downtrend after a major top pattern last year. CNC trades below the declining 40-week moving average line.
The weekly OBV line shows a decline from last August and signals that sellers of CNC have been more aggressive than buyers. The MACD oscillator is well below the zero line and poised to cross to the downside for a fresh outright sell signal.
In this daily Point and Figure chart of CNC, below, I can see that the software is projecting a downside price target in the $59 area.
In this second Point and Figure chart of CNC, below, I used weekly close-only price data, which suggests a target of $58, but the chart shows that a decline that deep may precipitate even further losses.
Bottom-line strategy: Traders should continue to avoid the long side of CNC as further declines look likely. I have not liked shares of CNC for a long time and I see no reason to change.
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