Hold Cigna stock as it eyes a breakout after boosted outlook

Health insurer Cigna Corporation (NYSE:CI) closed up 5.88% on Friday, making it among the top S&P gainers. The gains came at the back of an adjusted profit of $6.01 per share in the first quarter. The earnings surpassed $4.73 in the prior year and Wall Street’s expectations of $5.18. The revenue was $44.11 billion, topping estimates of $43.48 billion. 

Besides the earnings, the company’s statement regarding its outlook should help investors consider the stock. Health insurers were under pressure during the pandemic due to volatile medical costs. However, Cigna said the costs were offset by a postponement of non-urgent medical procedures. As a result, investors feared that pent-up demand would emerge once the pandemic abated. Cigna said that it sees no signs of pent-up demand, while Covid-19 costs were on a decline. 

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Going forward, Cigna expects a FY22 profit of at least $22.60 per share. The estimate is an improved outlook from the previous $22.40 and analysts’ projections of $22.50. The strong guidance has resonated well with investors, with the stock now aiming for fresh highs.

Cigna stock eyes a potential breakout at $262

Technically, Cigna stock trades at or close to the previous high of $272 reached on April 1. However, the stock is very bullish and could likely surpass the previous high. An RSI of 65 shows the strong is close to the overbought level but has room to run. 

We believe Cigna stock is robust enough to warrant a hold for investors after the raised guidance. New investors should look to buy lower on a retracement after the stock hits a fresh high. The key levels of the stock are $262, $222, and $167. The stock could retreat to the most immediate level(s) before continuing to go higher.

Summary

Investors should hold Cigna stock and consider exiting at higher new levels. Buy trades should be taken after the stock retreats to key support.

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