Aetna Showing Constructive Action During Correction


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Stocks have temperaments. They either fold under pressure or they don't.

With the market in correction, this is an excellent time to see how a stock reacts to a little adversity.

Health care benefits providerAetna ( AET ) is consolidating around its 10-week moving average in a disciplined fashion.

The stock is in the fourth week of a consolidation that could turn into a stage two, flat base.

Let's look at the recent action week by week.

In week one, the stock fell about 2% in 33% faster volume. The weekly close, though, was in the upper half of the range. Coupled with the strong volume, the high close was a sign of institutional support.

In week two, the stock rose 0.5% in light volume. The close also was high, but most notable was the tight trading range. Tight trade is constructive whether you measure it from week to week or from high to low within the week. Aetna had both.

The third week involved a 3% loss, which took it below the 10-week line. This wasn't ideal, but volume was 35% below average. The low volume showed big money wasn't panicking.

This week Aetna is trying to regain its 10-week line. Volume has been quiet.

The stock, which was No. 17 in this week's Big Cap 20, grew earnings 12% and 16% in the past two quarters on revenue gains of 7% and 31%.

Three things accounted for the 31% jump in revenue: higher health care premiums, growth in Medicare membership and the acquisition of Coventry Health Care.

The Street expects EPS to grow 15% this year on a 33% pop in sales.

The annualized dividend yield is 1.3% vs. 2.51% for the S&P 500.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas

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