Today’s Big Stock: Vanguard Health Systems, Inc. (NYSE: VHS)

Vanguard Health Systems, Inc. is an operator of healthcare delivery networks with presence in various urban and suburban markets. As of June 30, 2011, Vanguard had 26 acute care and specialty hospitals, which together with outpatient facilities and related businesses, allow it to provide a range of inpatient and outpatient services in the communities it serves. As of June 30, 2011, its hospitals had a total of 6,201 beds in the five locations: San Antonio, Metropolitan Phoenix, Metropolitan Chicago, Metropolitan Detroit and Masachusetts. On August 1, 2010, Vanguard purchased Westlake Hospital and West Suburban Medical Center in the western suburbs of Chicago, Illinois from Resurrection Health Care.

Please take a look at the 7-month chart of VHS (Vanguard Health Systems, Inc.) below with my added notations:

 

From October through December, VHS found support around $9 (navy). During the same period of time, the stock repeatedly hit $11 as resistance (red). Combined, the stock was stuck within a Rectangle pattern. VHS broke above the $11 resistance in mid-January, and as expected, the stock immediately started to find support at that $11 level. Unfortunately, a bad earnings report sent the stock back below $11 yesterday.

The Tale of the Tape: VHS is back below the $11 level. Long trades could be entered on a pullback down to $9, or on a break back above $11. Short trades could be made on a rally up to $11, or on a break below $9, if that were to happen.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT