After a brutal few weeks for investors, over the past few days I have noticed an increasing amount of stocks display classic seller exhaustion patterns that can lead to trading rallies. One such stock is HCA Healthcare (NYSE:HCA), which not only looks promising on the charts, but also has a structural tailwind worth respecting.
Important risk management note: We remain in a highly volatile market and one that begs us to take a step back from a risk management perspective. This is not the time to try and be a hero by swinging for the fences in the market.
Before looking at the charts, here is the structural backstop or ‘tailwind’ that I see in HCA stock:
With governments around the world unlocking the ‘whatever it takes’ approach to hold up their economies, companies of vital importance to the system will likely receive plenty of aid. In the United States it is likely that key healthcare and related companies such as HCA Healthcare will receive government aid from a rescue package. If that takes hold, then HCA stock will likely find a floor and bounce.
HCA Stock Charts
To put things into a bigger picture perspective, on the longer-term chart we see that hospital operator HCA Healthcare corrected more than 60% from the February highs into the recent lows. While the stock has sliced through just about any near- to intermediate-term support levels like a hot knife through butter, it has now reached a multi-year area of horizontal support around the $60 area.
Like most stocks out there, HCA stock in the near-term is vastly oversold as a function of the broader market risk-off phase of recent weeks.
On the daily chart over the past few days two of my proprietary trading indicators have flashed both severely oversold and an impending bullish reversal signal. Additionally, seller exhaustion from March 18 was followed on March 19 with ‘follow-through buying,’ which in turn was further strengthened on March 24 with a second rally day.
Trading HCA Stock
Barring any immediate-term outsize news around the company, HCA stock now looks to have near-term upside toward the $100 mark, while any strong one-day bearish reversal would be a stop loss signal. Remember to keep trading position size small in this volatile environment.
My favorite way to trade setups such as the one in HCA is using a conservative and simple options strategy. I am holding a special webinar on Wednesday, March 25 to explain this strategy. Sign up here for the free webinar.
Free options webinar: Serge’s simple and conservative options strategy for steady returns. Register here.