UnitedHeath Group Gapped Lower Last Week As Higher Medical Costs More Than Offset A Dividend Hike

UnitedHealth Group Inc (UNH) hiked its dividend by 14% representing the fourteenth consecutive year of raised dividends. This positive was more than offset by the report that medical costs were increasing quickly. This caused a major price cap lower on June 14, 2013. The stock had warnings from its daily and weekly charts. UNH has been below a death cross on its daily chart since January 30, 2023. The weekly chart ended last week negative. The stock closed last week at $458.49 with its ‘reversion to the mean’ at $400.32 which is the downside risk.

UnitedHealth has a p/e ratio at 19.97% with a dividend yield at 1.65%, according to Macrotrends.

The Daily Chart for UnitedHealth

Courtesy of Refinitiv XENITH

UnitedHealth set its 52-week high of $558.10 on October 31, 2022 and declined 18% to a low of $457.59 set on March 10, 2023. This was followed by a rebound of 16% to a high of $530.45 set on April 13, 2023. This was a failed test of its semiannual risky level at $530.84. The 52-week low of $445.68 was set on June 14, 2023. Note the price gap lower on June 14 is clearly shown on the chart. Remember that this price gap was caused by the report of higher medical costs.

Note the death cross formation that formed on January 30, 2023. A death cross occurs when the 50-day simple moving average declines below the 200-day simple moving average. A death cross is thus a sell signal.

The horizontal lines are the semiannual risky level at $530.85 and the annual risky level at $555.45. The 50-day and 200-day SMAs are now at $490.49 and $503.48.

The Weekly Chart for UnitedHealth

Courtesy of Refinitiv XENITH

The weekly chart for UnitedHealth ended last week negative with the stock below its five-week modified moving average at $484.07. UNH is well above its 200-week simple moving average or ‘reversion to the mean’ at $400.32. The 12x3x3 weekly slow stochastic reading is declining at 41.99. Stochastic readings scale from 00.00 to 100.00 with a number above 80.00 overbought and a number below 20.00 oversold.

Trading Strategy: Buy UnitedHealth on weakness to its ‘reversion to the mean’ at $400.32. Reduce holdings on strength to its 200-day simple moving average at $503.48.