Tenet Healthcare Corp (THC): Upside Surprise Is Ahead

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The healthcare sector of the S&P 500 in 2015 traded fairly flat for the year, but some notable hospital operator stocks dramatically underperformed the sector. Tenet Healthcare Corp (NYSE:THC) is one name that stood out to me as the stock dropped more than 40% last year and now as a result is reaching some major technical support.

Tenet Healthcare Corp (THC): Upside Surprise Is AheadActive investors and traders should sit up and take notice for THC stock, as shares could see some good mean-reversion higher in the near- to medium-term.

The first trading day of 2016 went anything but smoothly for the bulls as concerning economic data out of China and an all-out stock market halt unnerved investors the globe over and led to some lousy price action.

But the first couple of trading days of a new year can often be somewhat choppy, and as such, in my opinion, you shouldn’t read too much into them. Instead of freaking out, Monday was a good day to dig a little deeper and find some stocks and/or sectors that looked somewhat stretched on either the upside or downside.

Between Obamacare and the upcoming 2016 presidential election, there is plenty of headline news that could rock the healthcare sector, and thus a single-name stock like THC.

But this news flow is two-sided in that, just like bad news can weigh on the sector, some good news from the political camp or the fundamental side could rally some of the laggards in the space.

Enter Tenet Healthcare.

THC Stock Charts

Turning to the price action, which after all is the only arbiter, we see that the sharp drop in THC stock from 2015 has mean-reverted it back to a major multi-year area of horizontal support. The blue area acted as resistance from 2007 until 2012, when the stock staged a major breakout. By the autumn of 2014 however the stock became too stretched and after a double top last summer the stock accelerated sharply lower. From a momentum perspective as per the MACD oscillator the stock is also deeply oversold at readings last seen at its financial crisis lows in 2009. Of course just because THC stock has found a multi-year area of technical support does not mean it will immediately stop the drop and rebound higher. However a good-sized bounce off this line looks to be a good bet.

THC stock chart weekly
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On the daily chart we see that while THC stock continues to make a series of lower highs, thus far the October and December lows are holding.

THC stock chart daily
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The yellow 21-day moving average now roughly coincides with the diagonal resistance line, which is to say that once the stock can climb back above the $32 area, then through a multi-week/month lens some better upside momentum may open up. This could then see the stock mean-revert back higher into the high $30s, which is where previous horizontal resistance from 2014 comes in.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/tenet-healthcare-corp-thc-upside-surprise-is-ahead/.

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