Takeaways
- UnitedHealth’s shares will be under the spotlight on Monday following their worst daily loss since 1998, as the healthcare giant lowered its profit forecasts for the year due to rising medical costs.
- The recent recovery in the stock price toward its record high came to an abrupt end last week. The price fell decisively below 200-week moving median, which is closely watched.
- Investors should watch crucial support levels on UnitedHealth's chart around $439 and $389, while also monitoring key overhead areas near $550 and $606.
UnitedHealth Group shares (UNH) will likely be under scrutiny on Monday, after they posted their worst daily drop since 1998. The healthcare giant also cut its profit forecast for the full year.
The company, citing higher-than expected medical costs, has been challenged in recent years by the increasing demand for healthcare under its government-assisted Medicare Plans for aging adults, and members with disabilities.
The disappointing outlook probably caught market watchers by surprise after the stock had rallied to its record-high earlier this month following news that the federal government would pay Medicare insurance companies a higher than estimated rate.
UnitedHealth shares dropped 22% to $454 on Friday, before the U.S. markets closed for Good Friday. The stock is down 10% since the start of the year, in line with the S&P 500’s decline over the same period.
Below, we look at UnitedHealth’s weekly chart. We use technical analysis to identify key price levels that may be tracked by investors.
Decisive close below 200-week Moving Average
UnitedHealth’s recent recovery towards its all-time high (ATH), which was halted abruptly last weekend, when the price closed decisively below the closely monitored 200-week moving median. Importantly, this sell-off took place on above-average volumes, indicating that large market participants like hedge funds and institutional investor were selling out of conviction.
Moreover, this drop also pushed the relative strength indicator (RSI), below the 50 threshold. This signals an accelerating sales momentum.
We’ll identify two key support levels on UnitedHealth’s chart, where the shares may attract interest. We’ll also highlight key overhead areas that are worth monitoring during potential upswings.
Important Support Levels to Watch
The first level to watch is around $439. The shares might find support near the February swing-low, which also aligns with April’s trough last year and a minor correction in November 2021.
If the bulls are unable to defend this support level, shares may drop to $389. Investors are likely to look for opportunities to buy in this area near two troughs formed on the chart in 2021 during the strong uptrend of the stock.
Monitor these key areas of the sky
During stock upswings, it is worth monitoring the $550 key level. This area may see significant selling pressure as the shares are near several peaks of the chart going back to the April 2022 swing peak.
A rally above this area could also see UnitedHealth shares test higher levels at around $606. This area would likely draw significant attention near the April peak, which also coincides with a range in price action just below the record high of the stock.
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As of the date the article was written, author does not own any securities above.
