A dip-buying strategy for healthcare as UnitedHealth's woes hang over the sector
UnitedHealth has been a major drag on the healthcare sector, but is finally showing signs of a turnaround. This shift in sentiment is starting to show up across many healthcare securities — including the Health Care Select Sector SPDR Fund (XLV) , Humana (HUM) , Eli Lilly (LLY) , Merck (MRK) , AbbVie (ABBV) and others. While I could've chosen UnitedHealth for this trade, the stock is currently surrounded by controversies and analyst downgrades. So instead, I've decided to focus on Humana, which offers a cleaner set-up with fewer headline risks. For this trade, I'm relying on three technical indicators to build a directional bias. MACD (5,13,5) - Since the standard MACD is a lagging indicator, I've discussed using a short-term or "faster" MACD in past articles to help generate earlier entry signals. A bullish MACD crossover — where the MACD line crosses above the signal line — can act as a cue to start building positions sooner. That said, a faster MACD is more sensitive to price movements and can produce more noise, making trade management even more important. A good rule of thumb is to exit if the MACD crosses back below the signal line, which may indicate momentum is fading. In HUM's case, we saw a bullish MACD crossover on May — giving us an early signal to consider entering the trade. RSI (Relative Strength Index): This move was further validated by the RSI, which bounced off oversold territory on 5/15 and has been climbing sharply since. DMI (Directional Movement Index): The DMI consists of three components: DI+ (green line), DI- (red line), and ADX (blue line). When the DI- is above the DI+, it typically signals a downtrend. But when these lines begin to shift direction, it often hints at a potential trend reversal. In HUM's case, both the DI- and DI+ have started to turn, offering an early signal that a trend change may be underway. As broader markets rebound sharply from the recent tariff-driven correction, we're approaching a zone where resistance could start to kick in. This makes it an ideal time to consider rotating into more defensive sectors like Health Care or Consumer Staples — a smart way to balance your portfolio while locking in some protection. The Trade set-up I'm looking to take advantage of a potential upside move in HUM using a bull call spread. With the stock currently near $247, the trade involves going long the $245 call (in-the-money) and simultaneously selling the $250 call (out-of-the-money) to complete the spread. If HUM finishes at or above $250 by the June 13th expiration, the trade would deliver a full 100% return on the amount risked. This setup provides a balanced way to play the upside while keeping risk tightly controlled and clearly defined. Here is my exact trade setup: Buy $245 call, June 13th expiry Sell $250 call, June 13th expiry Cost: $250 Potential Profit: $250 You'll find many more setups like this — broken down step-by-step — in my book Mean Reversion Trading . I also share hundreds of real trade examples on my website: https://tradingextremes.com . -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader 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. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New York Post
5 hours ago
- New York Post
UnitedHealth investors approve new CEO's $60M pay package despite turmoil following top executive's assassination
UnitedHealth investors on Monday approved a pay package that includes $60 million in stock to its new CEO – even as the company is plagued by financial losses, reported criminal fraud accusations and the shocking murder of a top executive. Stephen Hemsley, who previously served as UnitedHealth's chief executive for about a decade until 2017, returned to the top job last month after the healthcare giant reported its first earnings miss since 2008. Along with the $60 million award, which vests in three years, Hemsley will earn a $1 million annual salary. 5 Stephen Hemsley, who previously served as UnitedHealth's chief executive for about a decade, returned to the top job last month. AP 'Steve Hemsley's compensation is positioned at the median for CEOs of comparable companies and is substantially aligned with the interests of all company shareholders,' a UnitedHealth spokesperson told The Post in a statement. Helmsley's expected windfall comes after Andrew Witty stepped down last month following four years at the helm. The company's market capitalization has more than halved since its November peak, losing over $250 billion. 'We will take actions necessary to deliver the performance we are capable of while providing exceptional services and outcomes for customers, consumers, and care providers,' the healthcare giant said in a statement. In December, the company was rocked in December by the execution-style killing in midtown Manhattan of Brian Thompson, who led its insurance branch. Accused killer Luigi Mangione has pleaded not guilty. His trial is set to begin in 2026. 5 Former UnitedHealth CEO Andrew Witty testifies at a Senate Finance Committee hearing in May 2024. AP Shareholders sued UnitedHealth last month for allegedly concealing how backlash from the killing was damaging its business. In a proposed class action filed last month in Manhattan federal court, shareholders said the insurer defrauded them after Thompson's assassination by shifting away from strategies that led to higher-than-average claims denials, without revealing the impact on profitability. UnitedHealth is also facing investigations from the Department of Justice for possible criminal Medicare fraud, according to The Wall Street Journal. 5 In December, the company was rocked in December by the execution-style killing in midtown Manhattan of Brian Thompson, who led its insurance branch. AP 'We have not been notified by the Department of Justice of the supposed criminal investigation reported, without official attribution, in the Wall Street Journal on May 14th,' a UnitedHealth spokesperson told The Post, calling the Journal's reporting 'deeply irresponsible.' Shares were little changed on Monday after falling about 40% this year. The stock plunged 22% on April 17, wiping out about $119 billion of market value, after the insurer cut its 2025 forecast for adjusted profit per share to between $26 and $26.50 from between $29.50 and $30. 5 UnitedHealth slashed its forecast in April and later suspended it altogether. via REUTERS At Monday's annual shareholder meeting, Hemsley apologized for the company's performance and told investors that management is determined to 'earn back your trust and your confidence.' The company will conduct a review of its policies and practices related to risk assessment, managed care and pharmacy services, which will be looked over by independent experts, Hemsley said. Investors were left stunned by UnitedHealth's dismal earnings and forecast, especially after former CEO Andrew Witty had given such an upbeat outlook just a few months earlier. 5 Luigi Mangione, accused of fatally shooting Brian Thompson, in Manhattan state court in February. AP But Witty – a British executive without a background in the US insurance industry – took an optimistic tone with shareholders even as problems stacked up behind the scenes, employees told the Journal. He was more removed than previous chief executives, running the Minnesota-based company while living in Buckinghamshire, outside London, and flying back and forth to Washington and Minnesota via jet, according to property records and UnitedHealth's proxy documents. He never moved into the special CEO office at UnitedHealth's Minnesota headquarters, where Hemsley had once worked from, according to the Journal. Witty also shifted monthly executive meetings – which had been in-person under Hemsley and so intense they were called 'colonoscopies' – online, former executives told the Journal. He was more casual in the office, wearing tracksuit-style tops and bright colorful sneakers instead of a suit and tie, according to the report. Some of his top hires were former colleagues from GSK, the London-based pharmaceutical company, and lacked experience in the US insurance industry, the Journal said. UnitedHealth profits soared under Witty for a time, but his changes also left UnitedHealth more prone to risks, which backfired when Medicare payment rules changed. The government pays Medicare insurers more for sicker patients with certain diagnoses, and UnitedHealth was recording those lucrative illnesses at high rates, according to a Journal investigation. In 2023, however, the government limited or ended lucrative payments on many diagnoses. The new rules took effect the following year.
Yahoo
7 hours ago
- Yahoo
UnitedHealth Declines 40.4% YTD: Here's Why it's Still Not a Bargain
UnitedHealth Group Incorporated UNH shares have tumbled 25.4% in the past month alone, bringing their year-to-date loss to 40.4%. That's well below the performance of both the broader industry (-29.2%) and the S&P 500 (flat). Among its peers, Humana Inc. HUM has declined just 8.1% and Elevance Health, Inc. ELV has gained 4%, underscoring UNH's uniquely sharp decline. Image Source: Zacks Investment Research Historically considered a defensive healthcare stock, UnitedHealth's consistent earnings, stable dividend, and low beta (0.45) made it a favorite among risk-averse, long-term investors. But this year's selloff may not be a buying opportunity; it looks more like catching a falling knife. UnitedHealth is facing simultaneous pressures across multiple business lines. The company missed both earnings and revenue estimates in the first quarter and withdrew its 2025 financial guidance. Meanwhile, rising medical costs, especially in the Medicare Advantage segment, continue to compress margins. Higher-than-expected patient volumes, particularly high-acuity cases, have further strained profitability. Moreover, CEO Andrew Witty stepped down, prompting the return of longtime executive Stephen Hemsley. Soon after, a Wall Street Journal report revealed a criminal investigation into alleged Medicare fraud. Additional setbacks include a major expansion of Medicare Advantage audits by the Centers for Medicare and Medicaid Services, raising the risk of penalties and reimbursement clawbacks. While Hemsley's $25 million stock purchase offered brief reassurance, the bounce was short-lived. The stock fell again after reports emerged alleging the company secretly incentivized nursing homes to avoid hospital transfers, an accusation the Department of Justice declined to pursue due to insufficient evidence, but one that damaged UNH's reputation nonetheless. Investor sentiment is rapidly Zacks Consensus Estimate for UNH's 2025 EPS has seen 12 downward revisions in the past month, while the 2026 EPS estimate has seen 10, without a single upward revision. Earnings for 2025 are now projected to decline by 17.3%, even as revenues are still expected to climb 12.9% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.) Image Source: Zacks Investment Research At first glance, UnitedHealth appears attractively priced, trading at a forward P/E of 12.31X, well below its five-year median of 19.20X. However, that multiple still sits above the industry average of 11.50X. By comparison, Humana trades at 15.18X and Elevance at 10.54X, placing UnitedHealth somewhere in the middle despite the selloff. Image Source: Zacks Investment Research But valuation alone is not enough to justify entry. Regulatory risk, cost pressures and reputational damage pose real threats to the company's business model. Optum Rx, UNH's pharmacy benefit manager, may also face headwinds from regulatory moves targeting PBMs' pricing power. President Trump's "most-favored nation" executive order will likely affect 'middlemen' and facilitate the direct sale of drugs to patients. Whether these issues mark a temporary rough patch or signal deeper structural challenges remains to be seen. Either way, the margin of safety appears thin at the moment. Despite the turmoil, UnitedHealth retains significant competitive advantages. Its vertically integrated model, scale, and investments in AI and digital health position it to navigate long-term industry trends. Medicare Advantage rate increases in 2026 could provide some relief to margins. As of March 31, 2025, UnitedHealthcare served 50.1 million members, up 1.9% year over year, driven by growth in self-funded commercial plans. U.S. healthcare spending continues to rise with an aging population and increasing chronic disease rates, trends that ultimately play to UnitedHealth's strengths. Financially, the company remains on solid footing. It generated $5.5 billion in operating cash flow in the first quarter, up significantly from $1.1 billion the year prior and ended the quarter with $34.3 billion in cash and short-term investments. It also returned over $5 billion to shareholders through dividends and stock buybacks. UnitedHealth's near-term outlook remains clouded by a series of setbacks, including regulatory probes, leadership change, rising costs and the withdrawal of 2025 guidance. While the company maintains a strong market position and generates solid cash flow, these challenges have sharply undermined investor confidence. Ongoing legal scrutiny and continued earnings downgrades have only deepened uncertainty around a potential recovery. With no clear catalysts in sight and the stock underperforming significantly, UnitedHealth carries a Zacks Rank #5 (Strong Sell). Investors may be better served waiting for signs of stabilization before re-entering. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report Humana Inc. (HUM) : Free Stock Analysis Report Elevance Health, Inc. (ELV) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
8 hours ago
- CNBC
While gold hogs the headlines, these other metals have promising technical set-ups, says Katie Stockton
Metals prices have shined year-to-date, with most metals having outperformed the S & P 500 Index and gold the standout relative performer. We believe gold's outperformance should persist given the positive long-term momentum that gold possesses in absolute terms and relative to equities. However, while gold seems to get all the press, there are other metals with promising technical set-ups that are worth a look from a technical perspective. Copper prices are higher Monday, unphased by weakness in metals affected by tariff headlines. The generic copper futures are above their 50-day, or ~10-week, moving average MA) in a pending breakout from a triangle pattern. Short-term momentum has shifted positive, increasing the likelihood that the weekly MACD (i.e., intermediate-term momentum) also flips positive, which suggests copper can continue to rally towards long-term resistance near $5.20/lb. Below this level, a long-term trading range is in place, so we feel a neutral long-term bias is appropriate for copper. Support is at the 200-day MA, near $4.43/lb. More important trendline support, near $4.08/lb., was briefly tested in April. Precious metals like gold and silver are in bullish long-term uptrends, but platinum is now on our radar as a potential catch-up opportunity. Last week, platinum confirmed a breakout above long-term triangle resistance, which is bullish for the next several months. Intermediate-term momentum is positive and strengthening per the weekly MACD, suggesting recent digestion will be brief and give way to additional upside follow-through. The next major resistance level we are watching for platinum is $1240/t oz., which is a long-term technical objective. This level is derived by a 50% Fibonacci retracement level, which captured the 2021 high. Former resistance, near $1030/t oz., is now initial support. —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. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer. Fairlead Strategies Disclaimer: This communication has been prepared by Fairlead Strategies LLC ("Fairlead Strategies") for informational purposes only. This material is for illustration and discussion purposes and not intended to be, nor construed as, financial, legal, tax or investment advice. You should consult appropriate advisors concerning such matters. This material presents information through the date indicated, reflecting the author's current expectations, and is subject to revision by the author, though the author is under no obligation to do so. This material may contain commentary on broad-based indices, market conditions, different types of securities, and cryptocurrencies, using the discipline of technical analysis, which evaluates the demand and supply based on market pricing. The views expressed herein are solely those of the author. This material should not be construed as a recommendation, or advice or an offer or solicitation with respect to the purchase or sale of any investment. The information is not intended to provide a basis on which you could make an investment decision on any particular security or its issuer. This document is intended for CNBC Pro subscribers only and is not for distribution to the general public. Certain information has been provided by and/or is based on third party sources and, although such information is believed to be reliable, no representation is made with respect to the accuracy, completeness, or timeliness of such information. This information may be subject to change without notice. Fairlead Strategies undertakes no obligation to maintain or update this material based on subsequent information and events or to provide you with any additional or supplemental information or any update to or correction of the information contained herein. Fairlead Strategies, its officers, employees, affiliates and partners shall not be liable to any person in any way whatsoever for any losses, costs, or claims for your reliance on this material. Nothing herein is, or shall be relied on as, a promise or representation as to future performance. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Opinions expressed in this material may differ or be contrary to opinions expressed, or actions taken, by Fairlead Strategies or its affiliates, or their respective officers, directors, or employees. In addition, any opinions and assumptions expressed herein are made as of the date of this communication and are subject to change and/or withdrawal without notice. Fairlead Strategies or its affiliates may have positions in financial instruments mentioned, may have acquired such positions at prices no longer available, and may have interests different from or adverse to your interests or inconsistent with the advice herein. Any investments made are made under the same terms as nonaffiliated investors and do not constitute a controlling interest. No liability is accepted by Fairlead Strategies, its officers, employees, affiliates, or partners for any losses that may arise from any use of the information contained herein. Any financial instruments mentioned herein are speculative in nature and may involve risk to principal and interest. Any prices or levels shown are either historical or purely indicative. This material does not take into account the particular investment objectives or financial circumstances, objectives or needs of any specific investor, and are not intended as recommendations of particular securities, investment products, or other financial products or strategies to particular clients. Securities, investment products, other financial products or strategies discussed herein may not be suitable for all investors. The recipient of this information must make its own independent decisions regarding any securities, investment products or other financial products mentioned herein. The material should not be provided to any person in a jurisdiction where its provision or use would be contrary to local laws, rules, or regulations. This material is not to be reproduced or redistributed absent the written consent of Fairlead Strategies.
