UnitedHealth Has Recovered Above a Key Indicator

Here's our latest technical strategy on UNH shares.

Back on June 13 we reviewed the charts of UnitedHealth Group (UNH)  here writing that "There is an old and politically incorrect saying on the floor of the stock exchange -- 'When they raid the house they take all the ladies' -- which is a crude way of saying that in a bear market no one is left unscathed. This could be the moment when UNH breaks its uptrend. Avoid the long side of UNH. A close below $468 would break the 200-day line, I believe."

Prices did break the 200-day line but the decline was short-lived and prices have recovered. Let's check on the charts again.

In the daily bar chart of UNH, below, we can see that the shares closed below the rising 200-day moving average line in June but a strange thing happened -- the trading volume did not expand sharply. Traders did not react in the way I would have anticipated.

Trading volume did surge when prices moved back above this long-term indicator. The On-Balance-Volume (OBV) line remained fairly steady in June as traders did not vote with their feet. The Moving Average Convergence Divergence (MACD) oscillator has recently moved above the zero line for a new outright buy signal. 

 

In the weekly Japanese candlestick chart of UNH, below, we can see the rise of the past three years. The break of the rising 40-week moving average line was temporary and prices have rallied again and are now not far below the April zenith.

 

The weekly OBV line dipped in April and May but has steadied in June. The MACD oscillator is narrowing towards a fresh outright buy signal. 

 

 

In this daily Point and Figure chart of UNH, below, we can see a potential upside price target in the $599 area. 

 

 

Bottom-line strategy: Traders who sold out their UNH longs when prices were breaking the 200-day line could repurchase the stock around $510 risking below $480. A retest of the April highs is our target for now. A trade at $550 could open the way to further gains.

 

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