Chart of the Day: This Health Care Position Is Due for a Bounce Soon
The stock has been hit hard of late but may find good support shortly at the 200-day moving average.
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The HMO business has been cracking of late as word of more regulation and less reimbursement for Medicare has this group scrambling to figure out the effect on future earnings. Elevance Health ELV is right in the mix here and unfortunately the price action reflects investor worry over future earnings forecasts.
But we like the business, and even as Elevance has fallen sharpy from the highs in early September we do believe this stock is poised for a strong bounce, certainly based on the chart.
Look back to July after a sharp drop, the stock bounced fierce off the 200-day moving average for a massive 23% move in about six weeks. This recent swoon is nearly to that moving average marker and should find good support at that level, which would end up being a higher low on the chart (if it bounces higher).
Without question the indicators are bearish. Money flow is poor, which indicates big institutional selling. Moving Average Convergence Divergence (MACD) has been on a sell signal for nearly a month, while stochastics are bearish and have lost upside momentum. So, an expected bounce is clearly a contrarian stance.
We rate Elevance a Three in TheStreet Pro Portfolio.
At the time of publication, TheStreet Pro Portfolio was long ELV.
