Health insurers and managed care companies breathed a collective sigh of relief today as the Obama administration backed off its push for a nationalized healthcare plan that many thought could be the nail in the coffin for private sector providers. The healthcare insurers as a whole rose over 2.5% today with many of the larger names tacking on gains of 3-5%.
Now, for an industry to have that much traction especially on a down day usually means that if the market reverses and moves higher, the industry will move up disproportionately. If at some point in the not-too-distant future the market regains its bullish tenor, which of these companies is best positioned to benefit? Let’s look at the technical aspects of each of the top five by market cap: Wellpoint (WLP), Aetna (AET), Cigna (CI), Humana (HUM), Coventry Healthcare (CVH).
Wellpoint (WLP):
Market cap: $25.5B
Current closing price: $53.70
% change from all-time high set 12/07: -40%
% change since Nov. 2008 & March 2009 lows: +95; +79%
Notes: Cleared major resistance at $43; next resistance at $58, then $70.
Aetna (AET):
Market cap: $12.9B
Current closing price: $29.63
% change from all-time high set 1/08: -50%
% change since Nov. 2008 & March 2009 lows: + 109; +50%
Notes: Just broke out of an uptrending triangle, a bullish pattern. Near major resistance at $30, then $35. (See chart below.)
Cigna (CI):
Market cap: $8.1B
Current closing price: $29.68
% change from high on 12/07: -48%
% change since Nov. 2008 & March 2009 lows: + 237; +120%
Notes: Very bullish uptrend since 11/08. Broke major resistance at $20 & $25; testing $30 resistance, then $35-$36.
Humana (HUM):
Market cap: $6.0B
Current closing price: $35.53
% change from high on 1/08: -58%
% change since Nov. 2008 & March 2009 lows: + 45; +90%
Notes: Channeled between $27.50 and $32.50 from April; broke out at end of July. Next resistance at $37.50, $41.50, and $50.
Coventry (CVH):
Market cap: $3.5B
Current closing price: $23.60
% change from high on 1/08: -63%
% change since Nov. 2008 & March 2009 lows: + 136; +195%
Notes: Broke out of uptrending island formation on 7/28/09. Minor resistance at $25; major at $30.
Summary & Notes
Ominous topping tails are in all of the candlestick charts of the above stocks. Technicians regard the topping tail as a bearish sign, at least for the short-term. So, if you’re thinking of opening a position in one of these, then you might want to wait for a pullback. This is good advice regardless since the market is aching to correct from its fast and furious run-up.
When it does pull back, the healthcare insurers at the top of my buy list are Coventry (CVH) and Cigna (CI), Technically, their charts are more attractive, perhaps because they’re doing a better job at running their businesses. Coventry raised earnings guidance on July 28 causing the stock to gap up over 5% on the open. Cigna offered mixed guidance, Humana guided in-line, and Wellpoint and Aetna lowered guidance. All companies recently reported several weeks ago.
That’s my technical report. It’s up to you to check the fundatmental health of these companies on your own.
Disclosure: No positions in any stocks mentioned.
