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Trade of the Day: UnitedHealth Group Is Waving Down the Bulls

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Shares of healthcare stocks in the S&P 500, as represented by the Health Care SPDR (ETF) (NYSEARCA: XLV ) along with the broader U.S. stock market, had a good start to 2018. As a result, healthcare scored a breakout. Within this sector shares of UnitedHealth Group Inc (NYSE: UNH ) have lagged the rally so far, but look increasingly giddy for a breakout.

Regular readers of this here column are aware that a key attribute of my research process is to analyze markets in multiple time frames. As a result, I also distinguish between trading positions and intermediate to longer-term investment positions.

With UnitedHealth scheduled to report its next batch of earnings on Jan. 16, I don't want to be exposed to any trading positions through this upcoming earnings report, but I have no issues holding any longer-term positions through it. Swing trading positions can always be re-entered once the near-term uncertainty around the earnings report has passed.

In the lower part of the multi-year weekly chart, we can see the healthcare sector ETF (XLV) this week starting to break out of a base that took several months to form. This is important to UNH stock because if money is flowing into the sector as a whole then the odds of any given healthcare stock rising (stocks are a highly correlated asset class) dramatically increase.

In the top half of the chart I plotted UNH stock, and although the stock is trading in the upper quadrant of its up-sloping range, more upside remains.

Moving averages legend: red - 200 day, blue - 100 day, yellow - 50 day

On the daily chart note that UNH stock since topping out in early December has spent the past few weeks in a tight and well-defined consolidation pattern we could label as a bull flag pattern. This type of pattern, as the name suggests, tends to have bullish implications once a breakout to the upside has occurred.

If you would like to find out what other investment and trading themes, sectors and stocks I like for 2018 and for the 1st quarter please join us for the market outlook and playbook webinar on Thursday, Jan. 11 by signing up here .

To wit, on January 4th UNH stock scored a marginal breakout of this pattern and while it could have been more pronounced may have been good enough for a next leg higher in the stock to start getting on its way.

Active investors and traders could look to buy UNH stock here for a next upside target in the mid $230s but respecting the aforementioned and upcoming earnings report on Jan. 16.

Moving averages legend: red - 200 week, blue - 100 week, yellow - 50 week

Check out Anthony Mirhaydari's Daily Market Outlook for Jan. 5.

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The post Trade of the Day: UnitedHealth Group Is Waving Down the Bulls appeared first on InvestorPlace .

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


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

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