Shares of UnitedHealth Group ( UNH) have continued strong in the face of broad market weakness. Can this condition continue or do we need to adjust our strategy?
In our December 6 review of UNH we wrote that "In our October 14 review we wrote that 'It looks like UNH is off to the races again.' Traders who are not long could buy a morning dip to around $412 if available. Risk to $395. Traders could stay long UNH but raise stops to $425. The round number of $500 is our next price target." UNH reached the $500 price target and retreated last month.
It's time to check the charts again.
In this updated daily bar chart of UNH, below, we can see that prices sprinted higher in recent days but stopped short of the late December/early January highs. UNH is above the 50-day moving average line but its slope is neutral. The rising 200-day moving average line intersects around $430 and was last tested in early October.
The On-Balance-Volume (OBV) line is rising and made a slight new high in January to confirm the price gains. This indicator needs to be watched closer for a shift in direction. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line but has crossed to the upside for a cover shorts buy signal.
In this weekly Japanese candlestick chart of UNH, below, we see a mixed picture. Prices are still in a longer-term uptrend above the rising 40-week moving average line. The weekly OBV line shows a smooth three-year advance to confirm the price gains. The MACD oscillator has crossed to the downside for a take profit sell signal.
In this daily Point and Figure chart of UNH, below, we still see an upside price target but a trade at $446 will likely weaken this chart.
In this weekly Point and Figure chart of UNH, below, we see the same price target as the daily chart. Again, weakness under $446 is not good.
Bottom line strategy: I will assume that traders did book some or all of their profits in UNH at $500 or higher. Raise stops on any remaining longs to $460 from $425.
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