The UNH chart is a great example of the importance of looking at multiple time frames. The short-term chart looks quite broken. The stock broke down below $70 support on huge volume after earnings:
The stock’s recent retracement is right back up into the 70-71 resistance area, which coincides with the declining 50 day moving average.
In short, I put the short-term odds on the side of the bears rather than the bulls. But the long-term picture looks much different. As I discussed in this CotD post back in the spring, UNH made an important breakout to an all-time high in 2013. Moreover, on a fundamental basis, UNH at 13x trailing 12 month P/E is much cheaper than most of the market, and in a sector with significant long-term tailwinds given demographics.
The long-term chart clearly favors the bulls after this year’s breakout:
The clean breakout above the $65 has held for several months. At this point, a pullback to near the breakout level would offer a great risk/reward opportunity for a long delta trade. So while the short-term picture looks less than stellar, the long-term setup suggests higher over the course of many months. We have this stock in our bullish bullpen as a result.