Disclosure: I have no positions in Aetna, Anthem, Cigna, Humana or UnitedHealth Group.
President Trump’s decision to eliminate cost-sharing subsidies to health care insurance providers caused late-week declines for shares of major insurers Aetna, Anthem, Cigna, Humana and UnitedHealth Group.
Dow component UnitedHealth reports earnings before the opening bell on Tuesday and analysts expect the company to earn $2.57 a share. Thanks to ObamaCare, UnitedHealth has beaten earnings-per-share estimates 15 quarters in a row. The other four report earnings results over the next two weeks.
Scorecard for the Five Key Health Insurers
When looking the weekly charts below, keep an eye on the 200-week simple moving averages shown in green. Investors should consider the 200-week simple moving average as the "reversion to the mean" for each stock. The reversion to the mean is an investment theory that the price of a stock, will eventually return to a longer-term simple moving average. A logical choice that's easy to track is the 200-week simple moving average. A ticker trading above its 200-week simple moving average will eventually decline back to it on weakness. Similarly, a ticker trading below its 200-week simple moving average will eventually rebound to it on strength.
Aetna (AET) closed Friday at $153.06, up 23.4% year-to-date and in bull market territory, 40.3% above its postelection low of $109.12 set on Nov. 8. The stock is 7% below its all-time intraday high of $164.52 set on Sept. 12.
The weekly chart for Aetna is negative with the stock below its five-week modified moving average of $156.00 and well above its 200-week simple moving average or reversion to the mean of $109.21. The 12x3x3 weekly slow stochastic is projected to end this week at 53.14, down from 60.53 on Oct. 13.
Investment Strategy: Buy weakness to my annual pivot of $119.12, last crossed as a buying opportunity during the week of Feb. 10. My quarterly pivot is $152.69. Reduce holdings on strength to my weekly and semiannual risky levels of $161.06 and $168.26, respectively.
Anthem (ANTM) closed Friday at $183.83, up 27.9% year-to-date and in bull market territory, 55.2% above its postelection low of $118.42 set on Nov. 9. The stock is 7.6% below its all-time intraday high of $198.98 set on Sept. 5.
The weekly chart for Anthem is negative with the stock below its five-week modified weekly moving average of $188.08. The stock is well above its 200-week simple moving average of $139.45, which is also the reversion to the mean. Note how the reversion to the mean was tested at $116.10 during the week of Nov. 4, just before the election. The 12x3x3 weekly slow stochastic reading is projected to decline to 47.85 this week, down from 51.45 on Oct. 13.
Investment Strategy: Buy weakness to my quarterly and annual pivots of $173.80 and $155.06, respectively. The annual level was last crossed as a buying opportunity during the week of April 28. Reduce holdings on strength to my semiannual risky level of $210.39.
Cigna (CI) closed Friday at $186.15, up 39.6% year-to-date and in bull market territory, 49.5% above its postelection low of $124.48 set on Nov. 9. The stock is 3.5% below its all-time intraday high of $193.00 set on Oct. 4.
The weekly chart for Cigna is positive but overbought with the stock above its five-week modified moving average of $183.94, and well above its 200-week simple moving average of $128.37, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to end the week at 82.14, still slightly above the overbought threshold of 80.00. A close this week below $183.94 should pull momentum below 80.00 resulting in a negative weekly chart.
Investment Strategy: Buy weakness to my quarterly and annual value levels at $167.88 and $154.46, respectively. The annual level was last crossed as a buying opportunity during the week of April 28. Reduce holdings on strength to my monthly and semiannual risky levels of $189.31 and $195.76, respectively.
Humana (HUM) closed Friday at $237.73, up 16.5% year-to-date and in bull market territory, 36.6% above its postelection low of $174.01 set on Nov. 8. The stock is 8.5% below its all-time intraday high of $259.76 set on Sept. 11.
The weekly chart for Humana is negative with the stock below its five-week modified weekly moving average of $243.09. The stock is well above its 200-week simple moving average of $173.10, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to decline to 48.20 this week, down from 54.27 on Oct. 13.
Investment Strategy: Buy weakness to my annual pivot of $204.56, last crossed as a buying opportunity during the week of March 31. My quarterly pivot is $233.51. Reduce holdings on strength to my monthly and semiannual risky levels of $265.57 and $274.06, respectively.
UnitedHealth (UNH) closed Friday at $192.52, up 20.3% year-to-date and in bull market territory, 41.3% above its post-election low of $136.22 set on Nov. 9. The stock is 4.1% below its all-time intraday high of $200.73 set on Oct. 4.
The weekly chart for UnitedHealth is negative with the stock below its five-week modified moving average of $194.15 and well above its 200-week simple moving average of $125.66, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to decline to 67.93 this week, down from 73.20 on Oct. 13.
Investment Strategy: Buy weakness to my annual value level of $147.98. Reduce holdings on strength to my semiannual, quarterly and monthly risky levels of $201.09, $201.53 and $203.96, respectively.
