Key Takeaways
- Shares in Humana will likely remain on watchlists after plunging 12% Wednesday on news the Centers for Medicare and Medicaid Services downgraded a large portion of the health insurer’s Medicare offerings.
- The stock has traded within a descending channel since July last year, with Wednesday’s sell-off testing the pattern’s lower trendline.
- Investors should watch key lower price levels on Humana’s weekly chart around $232, $218, and $190, while monitoring an important overhead price level near $300 if the stock stages a reversal.
Shares in Humana (HUM) will likely remain on watchlists after plummeting Wednesday to levels not seen in more than four years after the Centers for Medicare and Medicaid Services (CMS) downgraded a large portion of the health insurer’s Medicare offerings.
The change means that only 25% of Humana’s Medicare Advantage members will be enrolled in plans rated four stars or higher next year, a significant drop from 94% in 2024, an outcome likely to have a major impact on the quality bonuses Humana receives from the government, which in turn could pressure the health insurer’s earnings.
Humana shares fell 12% to close at $246.49, after dropping as low as $213.31 during Wednesday’s session. The company’s stock has plunged around 46% since the start of the year as ongoing challenges surrounding the Medicare Advantage health insurance program weigh on its share price.
Below, we take a closer look at Humana’s weekly chart and use technical analysis to point out important longer-term price levels worth watching.
Descending Channel Test
Humana shares have traded within a descending channel since July last year, with Wednesday’s sell-off testing the pattern’s lower trendline.
Importantly, the move has occurred on the highest weekly volume since mid-July 2016, indicating conviction by larger market participants behind the selling.
If the stock’s price stages a decisive close below the channel this week, investors should monitor three specific lower areas on Humana’s chart.
Key Lower Chart Levels to Watch
The first area to watch out for sits around $232, a location where the shares could encounter support near a horizontal line connecting several pullback lows from July to November 2017 with price action around prominent troughs that formed on the chart in April 2019 and March 2020.
Interestingly, this area also sits in close proximity to the projected price target of a bars pattern that takes the stock’s impulsive move lower from November to April and positions it from the July high.
A breakdown below this level could see a decline to the $218 area, where the shares may attract buying interest near the 2015 and 2016 peaks that formed within the stock’s longer-term uptrend.
Further selling opens the door to a retest of lower support around $190, an area on the chart where buy-and-hold investors may look for entry points near a trendline joining a range of comparable trading levels from July 2015 to February 2017.
Important Overhead Chart Level to Monitor
If the stock stages a reversal and moves higher, investors should keep a close eye on the $300 level. As well as possibly facing selling pressure around the psychological round number, the shares could also encounter overhead resistance from the August 2019 swing high and April 2024 swing low.
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