Centene Corp. (CNC) has nearly tripled over the past three years but prices have become stalled since September. The bar charts and indicators do not suggest much downside risk but the Point and Figure chart is another story.
Let me present the evidence of our three charts and see if we can craft a strategy that is flexible.
In the daily bar chart of CNC, below, we can see a rally from around $100-$95 to just short of $150 or about a 50% markup. Prices turned sideways at the end of August but some quick declines can be seen in October, November and early December. These $20 declines are not accompanied by heavy trading volume and the daily On-Balance-Volume (OBV) line is fairly steady. Without a pick-up in selling pressure or a decline in the OBV line I cannot become too bearish.
The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed to the downside for a take profits sell signal in early September and broke the zero line in October for an outright sell signal. This oscillator improved in November and early December but is not presenting a strong buy signal.
In this weekly bar chart of CNC, below, we can see a strong two-year rally. Prices are above the rising 40-week moving average line.
The weekly OBV line has been moving sideways the past four months while the MACD oscillator crossed to the downside at the end of September.
In this Point and Figure chart of CNC, below, a downside price target of $114.18 is indicated. A decline to $127.44 will weaken this chart.
Bottom-line strategy: The major trend for CNC is still up but in this current bearish environment for stocks one should not get complacent. Protect longs with a stop just below $125 and the 200-day moving average line.