Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Coventry Health Care (NYSE:CVH) is a managed health care company with health plans, insurance companies, network rental and workers’ compensation services businesses. As a general theme, health care remains an attractive play due to the agingU.S. population, specifically the baby boomer generation.
Given where we are in the broader market and economic cycle, I am hard-pressed to come up with many long-side trades, but with a long enough time horizon, a position in the health care sector may be worth considering.
On the weekly chart dating back to late 2008, note the nice uptrending channel in which CVH stock has been moving higher. The channel remains in place, and the stock again found support near the lower end of the channel during the broad market sell-off in early August.
The daily chart of CVH shows that the stock is currently wedged between its 50-day and 200-day moving averages. Historically, the stock has shown decent respect to these moving averages. At the moment, the 50-day sits above the stock’s price around $33.70. At the same time, a horizontal resistance area is right at the stock’s current price of $32.90.
Given these multiple layers of resistance, should the stock manage to move above them and hold, I could see a good opportunity to start building a longer-term position in CVH stock. Stops can be set near $30.50 with an initial price target at the July highs near $38.
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