In his second "Executive Decision" segment of "Mad Money" last Friday, Jim Cramer sat down with Michael Neidorff, chairman and CEO of Centene Corp. (CNC) . Centene is a health care provider that saw its shares fall 4% Friday and drop another 9% after Monday's market open. Neidorff said Centene is growing in both new and existing markets, is seeing margin expansion and, most importantly, is improving outcomes while lowering costs. "We're hitting all the things we need to hit," he said. When asked about a court case in Texas where a federal district judge ruled the Affordable Care Act (ACA) unconstitutional, Neidorff said it will ultimately be a non-event and the ruling will surely be overturned on appeal.
Finally, when asked about ACA enrollments for this year, Neidorff said they are already ahead of where they were at this time last year and more than 80% of current participants have already re-enrolled for next year. That's the fundamentals in a nutshell, so let's check out Centene's charts and indicators.
In this daily bar chart of CNC, below, we can see that prices closed in a precarious position on Friday -- right on the rising 200-day moving average line. The slope of the 50-day moving average line has been tilted lower since the middle of October and rallies/bounces in CNC last week stopped at the underside of this shorter average. The daily On-Balance-Volume (OBV) line looks like it topped in September and has since worked lower, telling me that sellers of CNC have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed to the downside last week for an outright sell signal.
In this weekly bar chart of CNC, below, we can see that prices closed just below the rising 40-week moving average line. The weekly OBV line shows a peak in August and four months of weakness. The weekly MACD oscillator crossed to the downside in late September for a take-profits sell signal on this longer time frame.
In this Point and Figure chart of CNC, below, we can see a distribution pattern since July (look for the "7" on the chart) and a downside price target of $114.18.
Bottom line strategy: CNC looks vulnerable to further declines. CNC opened below the October low, and that makes the Point and Figure target very believable. Below $114, the next possible price target is the $100 area. Longs need to take appropriate action.