Chart of the Day – $UNH Long-Term Breakout

by Enis April 2, 2013 11:27 am • Commentary

Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:

Within health care, the managed care space is on fire today.  (These days, health care seems to go up no matter what, just a question of which sub-sector leads.)  The news today was that the U.S. government reversed a decision to cut a key Medicare payment rate, an issue that had weighed on the sector earlier in 2013.

The whole space is ripping, and UNH has been a long-term leader among the insurers.  Here’s the 3 year chart showing the importance of its gap higher today:

3 year weekly chart of UNH, Courtesy of Bloomberg
3 year weekly chart of UNH, Courtesy of Bloomberg

The chart shows the strong performance in 2010 and 2011.  In 2012, UNH spent most of the year consolidating its prior gains, as the stock ranged between 50 (in red) and 60 (in green) for most of the year.  The stock’s gap up today is a clean breakout higher, and I expect the 60 level to act as strong support for the stock going forward.

On a longer-term basis, the 10 year monthly chart shows the significance of the 60-65 area:

10 year monthly chart of UNH, Courtesy of Bloomberg
10 year monthly chart of UNH, Courtesy of Bloomberg

The only hurdle left for UNH for a new all-time high is the $64.61 high from 2005.  Since 60 is strong support, and the new high is so close, I do expect an eventual break to all-time highs for the stock.  A good entry on the long side would be on a pullback to the 60-61 area.