UnitedHealth's recovery rally has more room to run, says Katie Stockton
UnitedHealth (UNH) has experienced a sharp sell-off of nearly 50%, with two news-driven gaps-down in the past month that pushed the stock below long-term support near $447. This decline has caused significant damage to UNH's long-term technical outlook. However, the stock appears poised for a short-term rebound following its recent stretch of dismal relative performance. Since gapping down in mid-April, UNH has been in a steep relative downtrend versus the S & P 500 Index (SPX) , mirroring the bearish price action. Now, signs are emerging that a relief rally has begun, which long-term holders may welcome as an opportunity to reduce exposure. A daily counter-trend signal from the DeMARK Indicators hints at downside exhaustion for UNH, reinforcing oversold conditions and supporting the view that UNH is due for a near-term recovery. A countering signal showed upside exhaustion last September. Initial resistance is at former support (~$447), which, while not necessarily a reasonable objective, gives the short-term rally room to the upside. Looking at rest of healthcare The healthcare sector's problems have not been limited to UNH. The sector has been a source of short- and long-term underperformance. Heavyweights like Amgen (AMGN) , Eli Lilly & Co. (LLY) , Merck (MRK) , and Regeneron (REGN) saw bearish reversals late last year, while others like Johnson & Johnson (JNJ) and Pfizer (PFE) extended their secular downtrends. Now, these stocks are individually showing signs of downside exhaustion, and because healthcare stocks generally hold defensive properties, their relative performance should improve in a weaker tape. AMGN, for one, is oversold from an intermediate-term perspective in absolute and relative terms. The latest downdraft has brought AMGN back to a long-term support area near $260 defining the stock's trading range. The DeMARK Indicators have a new counter-trend signal supporting a minimum four-week period of stabilization, which should contribute to relative improvement versus the SPX. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. 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