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WellCare Looks Good

Action on the weekly chart of the managed-care provider appears constructive.
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Medicare eligibility will expand in 2014 under the provisions of the Affordable Care Act of 2010. WellCare Health Plans (WCG) provides managed care services for government-sponsored health care programs and is positioned to benefit from that increase.

WellCare Health Plans (WCG)

Source: StockCharts.com

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After pulling back more than 35% since its April 2012 high, the action on the weekly chart looks constructive as the stock attempts to base off a two-year uptrend line and above its 50-day moving average. It is now bumping up against a horizontal resistance level that supported the stock price for most of last year, until it was breached in October. That break has been contained by the uptrend line long enough for the technical indicators to recover and roll back to the upside. The Relative Strength Indicator is crossing above its 21-period signal average, stochastics is making a bullish crossover from an oversold condition, and moving average convergence/divergence is making a positive crossover. During this three-month consolidation period, volume has been attempting to get traction above its 50-day moving average, and while Chaikin Money Flow is in distribution territory, the Money Flow Index, a relative strength indicator of volume, is improving and nearing its centerline.

WCG is a buy after a weekly close in upper candle range above the horizontal resistance line, using a position size that allows for a stop in the $45.25 area.

This analysis uses the weekly chart, and I know the consensus says a weekly setup should be triggered by a catalyst on the daily chart. Multiple time-frame analysis is important, but there are trades and trading periods when it can be advantageous to initiate a pure weekly chart trade. Using weekly charts requires deeper stop-loss levels and, consequently, smaller position size, but they allow trades to be held longer and lessen the issues associated with daily volatility. Trend lines are similarly positioned. While a break requires multiple trading days for verification, and there is slippage, trades have more time to develop and become profitable. When the daily drama of the broader market has you second-guessing trades, take shelter in the weekly charts.

At the time of publication, Moreno had no positions in the stocks mentioned.