UnitedHealth Group Inc. (NYSE: UNH)

UnitedHealth Group Incorporated operates as a diversified health and well-being company in the United States. The company’s UnitedHealthcare segment offers consumer-oriented health benefit plans and services for large national employers, public sector employers, mid-sized employers, small businesses, and individuals; health care coverage, and health and well-being services to individuals aged 50 and older addressing their needs for preventive and acute health care services, as well as services dealing with chronic disease and other specialized issues for older individuals. Its OptumHealth segment provides health management services, integrated care delivery services, consumer relationship management, sales distribution platform services, and financial services. Its OptumRx segment provides pharmacy benefit management services and programs, including claims processing, retail network contracting, rebate contracting, and management; and clinical programs, such as step therapy, formulary management, and disease/drug therapy management programs.

Please take a look at the 1-year chart of UNH (Unitedhealth Group, Inc.) below with my added notations:

1-year chart of UNH (Unitedhealth Group, Inc.)

UNH trended consistently higher from the beginning of the year until September. Since then, the stock seems to have formed an inverse head and shoulders pattern (blue). I have noted the head (H) and the shoulders (s) to make the pattern more visible. UNH’s neckline resistance is at the $75 level (red). The stock would confirm the pattern by breaking up through the $75 neckline and should move higher overall from there.

Lastly, keep in mind that simple is usually better. Had I never pointed out this inverse H&S pattern, one would still think this stock is moving higher simply if it broke through the $75 resistance level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break above the key $75 level.

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The Tale of the Tape: UNH has formed an inverse head & shoulders pattern. A long trade could be entered on a break above the $75 level with a stop placed under that level.

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

Follow me on Twitter: @cmtstockcoach