Long Trade Idea
Enter your long position between 303.70 (yesterday’s intra-day low) and 312.89 (the intra-day high of the last candlestick that pierced the horizontal resistance zone).
Market Index Analysis
- UnitedHealth Group (UNH) is a member of the Dow Jones Industrial Average, the S&P 100, and the S&P 500.
- All three indices try to hold on near record highs, but downside risks continue to rise.
- The Bull Bear Power Indicator of the S&P 500 shows a negative divergence.
Market Sentiment Analysis
Yesterday’s JOLTS report from the Bureau of Labor Statistics showed that more Americans are out of work than there are available job openings. For the first time since April 2021, the ratio of job vacancies to unemployed workers decreased below 100. The latest reading of 0.99 compares to 0.96 in April 2021. President Trump also suggested his administration might have to unwind trade deals if it loses the court case against his tariffs. Amid the uncertainty and cooling labor market, traders price in a September interest rate cut with nearly 100% assurance. Friday’s NFP report can make or break that case.
UnitedHealth Group Fundamental Analysis
UnitedHealth Group is a leading US health insurer and healthcare provider. UNH is the largest healthcare company by revenue and the world’s seventh-largest company by revenue.
So, why am I bullish on UNH after its recent rally?
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The sell-off that made the share price sink by more than 50% created a once-in-a-generation valuation. The criminal investigation into Medicare fraud presents a short-term distraction, and I think UNH will come out ahead. The quarterly dividend compensates for the uncertainty, and I believe that the implementation of AI will lower operating costs and boost efficiency moving forward. Berkshire Hathaway has also accumulated shares in UNH, which is another nod towards its long-term potential.
UnitedHealth Group Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 13.33 indicates UNH is an expensive stock. By comparison, the P/E ratio for the S&P 500 is 29.81.
The average analyst price target for UNH is $327.71, which suggests reasonable upside potential with fading downside risks.
UnitedHealth Group Technical Analysis
UnitedHealth Group Price Chart
- The UNH D1 chart shows a price action inside its horizontal resistance zone with breakout momentum rising.
- It also shows price action completing a breakout sequence above its Fibonacci Retracement Fan.
- The Bull Bear Power Indicator has been bullish for sixteen trading sessions with an ascending trendline.
- The average bullish trading volumes are higher than the average bearish trading volumes.
- UNH pushed higher as the S&P 500 struggled, a significant bullish trading signal.
My Call on UnitedHealth Group
I am taking a long position in UNH between $303.70 and $312.89. Valuations are low for an excellent retirement and dividend portfolio pick like UNH. Bullish momentum continues to rise, and I see the breakout sequence extending until UNH closes its previous price gap to the downside.
- UNH Entry Level: Between $303.70 and $312.89
- UNH Take Profit: Between $393.11 and $413.26
- UNH Stop Loss: Between $273.85 and $278.22
- Risk/Reward Ratio: 3.00
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