How to Trade 5 Insurers Despite Pending Healthcare Reforms

Five major health insurers Aetna (AET) , Anthem (ANTM - Get Report) , Cigna (CI - Get Report) , Humana (HUM - Get Report) and UnitedHealth (UNH - Get Report) have positive weekly charts and each reported better-than-expected earnings between April 18 and May 5, despite health care reform uncertainties.

Repeal and replace the Affordable Care Act is one of the major campaign promises made by President Trump. When Obamacare became law, it did so without a single Republican vote. Recently, the House of Representatives passed the American Healthcare Act without a single Democrat vote.

Republicans in the Senate have differing views on how to repeal and replace Obamacare, but they feel Obamacare is doomed for failure. Another death nail was hammered into Obamacare late-Wednesday, when Aetna announced it would leave all health exchanges by 2018.

When looking at the weekly charts below, keep an eye on the 200-week simple moving averages shown in green. Investors should consider the 200-week simple moving average as the "reversion to the mean" for each stock.

The "reversion to the mean" is an investment theory that the price of a stock, will eventually return to a longer-term simple-moving average. A logical choice that's easy to track is the 200-week simple moving average. A ticker trading above its 200-week simple moving average will eventually decline back to it on weakness. Similarly, a ticker trading below its 200-week simple moving average will eventually rebound to it on strength.

Jim Cramer and Real Money columnists discuss the latest from President Donald Trump and the GOP efforts to repeal and replace the Affordable Care Act. See which stocks they are discussing and get his insights or analysis with a free trial subscription to Real Money.

Here's a Scorecard for the Five Key Health Insurers
Here's a Scorecard for the Five Key Health Insurers

All five health insurers are solidly in bull-market territory, between 27.3% and 52.1% above their post-election lows. Each had a positive reaction to recent earnings. UnitedHealth reported on April 18 and set its post-election high on May 1. Anthem reported on April 26 and set its post-election high on April 27. Aetna reported on May 2 and set its post-election high on May 10. Humana reported on May 3 and set its post-election high on May 9. Cigna reported on May 5 and set its post-election high on May 9.

Aetna Inc. (AET)
Aetna Inc. (AET)

Courtesy of MetaStock Xenith

The weekly chart for Aetna  (AET) is positive but overbought with the stock above its key weekly moving average of $134.26 and well above its 200-week simple moving average, or "reversion to the mean," of $98.96. The weekly momentum reading is projected to rise to 86.00, moving well above the overbought threshold of 80.00. Buy weakness to my monthly and quarterly value levels of $132.37 and $132.14, respectively. My annual value level is $119.12. Sell strength to my semiannual risky level of $155.42.

Anthem Inc. (ANTM)
Anthem Inc. (ANTM)

Courtesy of MetaStock Xenith

The weekly chart for Anthem (ANTM - Get Report) is positive but overbought, with the stock above its key weekly moving average of $171.75, and well above its 200-week simple moving average of $127.79, which is also the "reversion to the mean". The weekly momentum reading is projected to end the week at 81.42, just above the overbought threshold of 80.00. Buy weakness to my annual value level of $155.06. My monthly pivot is $180.16. Sell strength to my semiannual risky level of $190.18.

Cigna Corp. (CI)
Cigna Corp. (CI)

Courtesy of MetaStock Xenith

The weekly chart for Cigna  (CI - Get Report) is positive but overbought with the stock above its key weekly moving average of $155.00, and well above its 200-week simple moving average of $117.42, which is the "reversion to the mean." The weekly momentum reading is projected to rise to 85.04 this week, well above the overbought threshold of 80.00. Buy weakness to my annual and quarterly value levels of $154.46 and $151.73, respectively. Sell strength to my semiannual risky level of $181.64.

Humana (HUM)
Humana (HUM)

Courtesy of MetaStock Xenith

The weekly chart for Humana  (HUM - Get Report) is positive but overbought with the stock above its key weekly moving average of $219.11. The stock is well above its 200-week simple moving average of $156.33, which is the "reversion to the mean." The weekly momentum reading is projected to rise to 86.52 this week, well above the overbought threshold of 80.00. Buy weakness to my annual and quarterly value levels of $204.56 and $200.83, respectively. My monthly pivot is $226.83. Sell strength to my semiannual risky level of $246.19.

UnitedHealth (UNH)
UnitedHealth (UNH)

Courtesy of MetaStock Xenith

The weekly chart for UnitedHealth  (UNH - Get Report) is positive but overbought with the stock above its key weekly moving average of $169.99, and well above its 200-week simple moving average of $112.14, which is the "reversion to the mean." The weekly momentum reading is projected to rise to 81.67 this week, moving above the overbought threshold of 80.00. Buy weakness to my quarterly and annual value levels of $160.33 and $147.98, respectively. My semiannual pivot is $173.44. Sell strength to my monthly risky level of $184.16.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.