HMS Holdings Corp. provides cost containment services to government and private healthcare payers and sponsors. The company’s services include co-ordination of benefits and program integrity services. Its co-ordination of benefits services provide cost avoidance services that offer validated insurance coverage information, which is used by government-sponsored payers to co-ordinate benefits for incoming claims; and program integrity services identify improper payments on a pre-payment and post-payment basis, identify and recover overpayments, detect and prevent fraud and abuse, and identify process improvements.
Take a look at the 1-year chart of HMS (Nasdaq: HMSY) below with added notations:
HMSY has been trading sideways for the last 2 months, while forming a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. HMSY’s rectangle pattern has formed a $23 resistance (blue), which actually goes all the way back to February, and a $20 support (red). At some point the stock will have to break one of the two levels created by the rectangle pattern.
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The Tale of the Tape: HMSY is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $20, or on a breakout above $23. The ideal short opportunity would be on a break below $20 with an expectation of a fall down to the $18 level (green).
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach