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Key Takeaways
- UnitedHealth Group shares surged more than 6% on Tuesday after the health insurance giant topped Wall Street’s quarterly earnings estimates and maintained its full-year profit outlook.
- The share price staged a decisive close above the 50-week moving average but remains within a multi-year trading range.
- The measuring principle, which calculates the distance between the range’s upper and lower trendlines and adds that amount to the top trendline, forecasts a profit target of $651.
- UnitedHealth shares may encounter key chart support from two key trendlines at $500 and $455.
UnitedHealth Group (UNH) shares surged more than 6% on Tuesday after the health insurance giant topped Wall Street’s quarterly earnings estimates and maintained its full-year profit outlook, helping to ease investors’ concerns over the financial impact of a February cyberattack on one of its subsidiaries. The stock was the top gainer on the Dow Jones Industrial Average, which soared to a record high on Tuesday.
Below, we take a closer look at UnitedHealth’s weekly chart and use technical analysis to identify key chart levels to watch out for.
Trading Range Breakout Looms
UnitedHealth shares have oscillated within a trading range since January 2022, helping to establish clearly identifiable support and resistance areas.
The stock briefly broke below the range’s lower trendline and 200-week moving average (MA) in early April, but promptly closed back in the range on above-average volume to confirm a bear trap. Such a pattern arises from a lack of sustained selling momentum and can be seen as a deceptive signal that tricks investors into selling or opening short positions prematurely.
More recently, shares in the Dow component have consolidated just below the 50-week MA since mid-June, but staged a decisive close above the indicator on Tuesday after the company’s better-than-expected quarterly results.
Although the price failed to break out above the trading range’s top trendline yesterday, it may make another attempt in upcoming trading sessions given the stock has ample room to move higher with a relative strength index (RSI) reading well below overbought levels.
Monitor This Price Level Amid Further Buying
As there’s limited overhead price action to analyze, we can use the measuring principle to forecast a potential price target if the price continues its upward momentum.
To do this, we calculate the distance between the range’s upper and lower trendlines in points and add that amount to the top trendline. For example, we add $98 to $553, which projects a target of $651.
Key Rangebound Levels to Watch
If the stock remains rangebound, investors should eye two key price levels where it would likely attract support.
The first area sits roughly at the midway point of the range around $500, a location on the chart where buyers may perceive value near the 50-week MA and a horizontal line that connects a series of peaks and troughs over the past two and a half years.
Finally, a close below this level could see the shares revisit the $455 area, where they would likely encounter significant support near the trading range’s lower trendline.
UnitedHealth shares were up 0.6% at $552 in premarket trading Wednesday about two hours before the opening bell.
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As of the date this article was written, the author does not own any of the above securities.