UnitedHealth Group Could Be Headed Lower, Here’s Why – February 2, 2021

A key support level has formed in the chart of UnitedHealth Group Inc. (UNH).  If this level is broken, a breakdown could occur.

UNH is the largest private health insurance provider in the United States, offering medical benefits to nearly 50 million members across its U.S. and international businesses.

UNH has grown its sales consistently over the past few years. This should continue as the company has a strong market position that is driven by new deals and an expansion of its offerings. The company’s health service business, Optum, is growing through pharmacy care services, technology, and government services.

The company has $20.8 billion in cash as of the end of the last quarter, compared to only $3.9 billion in short-term debt. UNH is also profitable with a high 25.7% return on equity. Both sales and earnings are up over the past year, while earnings are expected to rise 16% this year.

The stock has a reasonable P/E of 20.8, due to its recent bearish momentum, though UNH is up almost 25% for the past year. The company has an overall rating of Buy in our POWR Ratings system.

Take a look at the 1-year chart of UNH below with added notations:

UNH has formed an important level of support at $330 (green) over the past few months. The stock is currently sitting at that $330 level again, thus another bounce may follow. However, if the support were to break, lower prices will likely follow for UNH.

If the stock were to break below the $330 support level, a short position could be entered.

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UNH shares rose $2.20 (+0.66%) in premarket trading Tuesday. Year-to-date, UNH has declined -4.13%, versus a 1.49% rise in the benchmark S&P 500 index during the same period.

Author: Christian Tharp, CMT