The daily chart shows the weakness with more possible downside to follow:
It has not retested its November lows, and all the long-term charts show weakness. The weekly chart shows the heavy selling, and looking back on March of 2008, one can see the follow through that occurred on such high volume:
Futures yesterday morning were trading below the November lows on the S&P, so it was evident we would see new lows on the S&P and the Dow. For this reason, a put on UNH for follow through to the downside was a trade with the trend. (The trend is your friend!)
Unbelievably, the stock was trading up a few cents in pre-market, confirming the possibility of a good entry. Resistance at 20.64 could be seen on the 2-hour chart:
In addition, a bear flag pattern is working its way across the 2-hour chart...
Furthermore, the daily pivots showed resistance at the pivot point of 20.95. So the entry at 20.60 was a good risk-to-reward scenario.
For a disciplined trade, even though it seems the stock will go lower at some point, the exit was best executed before the end of trading, going into the weekend. This is not a stock I follow regularly, so I believe it is particularly prudent to stay away from 'swing trades' on stocks that are unfamiliar.
The stock did not fall hard, and the 30-minute macd shows the probable reason why:
White macd on the 30-minute chart often seems to keep the stock from falling too hard. In addition, maybe the sellers were exhausted from the heavy selling pressure all week.
Another reason for support can be seen on the daily chart at the beginning of this post. It shows support (marked by a trendline) at 19.50.
It will be interesting to see if there is more follow through next week. I hate to see the health care system go the way of socialization...it will be hard on many of these companies.
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I have not seen anything new in awhile.
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