Aetna (AET) Stock Summer Jump Was an Oasis in the Desert

A break below $100 for Aetna (AET) is likely to prompt further losses towards the next support area.
By Bruce Kamich ,

NEW YORK (TheStreet) -- Parts of the market have done well since the August and September bottom, but Aetna (AET) did not make the cut. AET looks like it will trade lower.

Take a close look at this chart of AET, above. Look at the June to July period. In June, AET gapped to the upside. Prices then hung in the $130 area before another gap occurred. This second gap was to the downside in July. Volume was heavy on this bearish gap and prices have continued lower. Chartists call this pattern an island reversal.

Think of the price gaps as water and you should be able to see the pattern. We can also see the downward sloping 50-day moving average, which is about to cross below the slower 200-day average. This crossover is commonly called a dead cross. Yes it is a bearish signal.

In this longer-term chart of AET, above, we can see that prices are below the 40-week (aka 200-day) moving average. Also the round number of $100 is a key level on this chart. A break below $100 for AET is likely to prompt further losses towards the next support area. Traders should avoid the long side of AET.

TheStreet Ratings team rates AETNA INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate AETNA INC (AET) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, AET's share price has jumped by 32.05%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AET should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $1,026.50 million or 3.95% when compared to the same quarter last year. In addition, AETNA INC has also modestly surpassed the industry average cash flow growth rate of 3.68%.
  • AETNA INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AETNA INC increased its bottom line by earning $5.66 versus $5.35 in the prior year. This year, the market expects an improvement in earnings ($7.55 versus $5.66).
  • You can view the full analysis from the report here: AET

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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