In his second "Executive Decision" segment of "Mad Money" last Friday, Jim Cramer again sat down with Michael Neidorff, chairman, president and CEO of Centene Corp. (CNC) Cramer's favorite managed-care provider. We looked at the charts of CNC back in late May and liked how they were improving.
Neidorff said Centene continues on its mission to improve patient outcomes by modernizing healthcare and expanding its ecosystem. He said the Affordable Care Act marketplace is working and more than 80% of its customers renew their plans. When asked about some political candidates' proposals for a single payer healthcare system, Neidorff said many of these plans simply won't work. He said the government is never more efficient than private industry and the only way it can save money is by withholding care.
Neidorff said in the current system, Centene is able to teach people how to use insurance properly and move them from Medicare to their own plans. The thing America needs are new ideas for getting more people insured, he said. Let's check the charts again.
In this updated daily bar chart of CNC, below, we can see some basing action the past two to three months. Prices are stabilizing in the $46 to $58 area with heavier-than-normal volume. Heavy volume at a potential low or after a decline suggests that aggressive sellers are meeting aggressive buyers -- that is the only way to explain heavy volume and the stock going sideways. The On-Balance-Volume (OBV) line has been choppy in a sideways range since late March. The Moving Average Convergence Divergence (MACD) oscillator is on the zero line and could turn up or down depending on the price action going forward.
In this weekly bar chart of CNC, below, we can see mixed signals on this time frame. Prices have been in a downtrend and below the declining 40-week moving average line since last December. The weekly volume pattern matches the daily pattern and the OBV line has risen and declined. The MACD oscillator has crossed to the upside from below the zero line for a cover shorts buy signal.
In this Point and Figure chart of CNC, below, the software is generating a downside price target around $45 for either a double bottom or a new leg lower. A rally to $58.65 will be an upside breakout and turn the chart bullish, in my opinion.
Bottom line strategy: It looks like CNC is transitioning from a downtrend to a base pattern. A rally above the highs of April and May or above $58 will be positive.