Humana (HUM) ($118.78 vs. $103.22 on Dec. 31, up 15% YTD) provides health care services networks. The stock traded as low as $91.00 on Feb. 5, holding its 200-day SMA and providing a buying opportunity. The stock set an all-time intraday high at $119.93 on Thursday. The weekly chart is positive with its five-week MMA at $107.63. We have a monthly pivot at $115.23 that was penetrated on Wednesday. Previous semiannual pivots at $112.88 and $111.32 are now value levels. The low was below an annual pivot at $99.27.
UnitedHealth ($81.53 vs. $75.30 on Dec. 31, up 8.3% YTD) is a health care provider and Dow component. It traded as low as $69.57 on Feb. 10, holding is 200-day SMA and providing a buying opportunity. The stock set an all-time intraday high at $81.59 on Thursday, which is higher than this month's risky level of $81.42. The weekly chart is positive with its five-week MMA at $76.11. A semiannual pivot is $79.65 with quarterly and semiannual value levels at $76.43 and $75.19, respectively. The latter two levels were pivots earlier in the year.
WellCare Health (WCG) ($66.95 vs. $70.42 on Dec. 31, down 4.9% YTD) is a provider of managed care services targeted to government-sponsored health care programs. It set a 2014 intraday high at $73.44 on Jan. 15 then traded as low as $55.16 on Feb. 12 before rebounding to as high as $67.53 on Thursday. The weekly chart is positive with its five-week MMA at $64.37. The high was above its quarterly risky level at $70.66. The low was below both annual value levels at $57.19 and $55.41, making both ends of this extremely volatile pattern tradable. Investors could have reduced holdings at $70.66 and rebuilt the position at $57.19 and $55.41 with GTC limit orders.
WellPoint (WLP) ($99.71 vs. $92.39 on Dec. 31, up 7.9% YTD) is a health benefits company with affiliations with some Blue Cross and Blue Shield associations. The stock traded as low as $81.84, giving investors the opportunity to buy at its 200-day SMA. The stock set an all-time intraday high at $100.59 on Wednesday. The weekly chart profile is positive with the five-week MMA at $91.75. Investors also could have bought this stock at the semiannual value level at $84.41.
Crunching the Numbers with Richard Suttmeier
There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.
The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.
Interpretations: (A red number in a moving-average column means the stock is below that moving average.)
Five-Week Modified Moving Average (MMA) is one of two indicators that define whether a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.
A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.
A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.
A stock with a neutral technical rating has a profile that is not positive or negative.
The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three- to five-year horizon. (Even Apple (AAPL) declined to its 200-week SMA in June 2013.)
The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA likely will move higher over a rolling three- to five-day horizon and vice versa.
The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators on financial TV.
The 200-Day Simple Moving Average is another technical support or resistance, and I consider this level to be a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon. (Even Apple tested or crossed its 200-day SMA in nine of the last 10 years.)
Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.
Investors who wish to buy a stock should use a GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff