Centene, Humana, UnitedHealth, WellPoint in Focus Thanks to Obamacare

NEW YORK (TheStreet) -- Centene (CNC) , Humana (HUM) , Dow component UnitedHealth (UNH) and WellPoint (WLP) set all-time highs on Friday, as these health maintenance companies are well-positioned to take advantage of new business though Healthcare.gov. Investors should consider defensive investment strategies to lock-in longer-term gains. The four stocks closed in the red Monday.

The three-month open enrollment period to sell 2015 Obamacare health plans begins on Nov. 15, and technology issues that came to light a year ago do not seem to be issues this year.

More than 7 million subscribers signed up through Healthcare.gov for their 2014 plans a year ago and the Congressional Budget Office expects 13 million signups to buy their healthcare plans through an exchange via Healthcare.gov in 2015 and 24 million signups in 2016. The major health care insurance companies are prepared to benefit and have been market leaders on strong technical momentum in anticipation of this significant surge in demand for health care by Americans.

Tuesday's mid-term elections is a buy opportunity even if the Republicans take over the Senate. The call to appeal the Affordable Care Act has quieted significantly and it now seems as if Obamacare is here to stay.

Here's how to trade these health care stocks, making sure that long-term gains are locked in, given downside volatility.

Centene ($92.67) declined 11% from $83.97 on Sept. 29 to $75.06 on Oct. 15, and after this correction rallied 26%, to an all-time intraday high at $94.90, on Oct. 31, helped by a solid third-quarter earnings beat on Oct. 28.

Investors long this stock should consider employing a sell-stop below a key technical level at $87.50 to lock-in longer-term gains.

Humana ($138.85) declined 11% from $135.86, on Sept. 22, to $121.04, on Oct. 15. After this correction, it  rallied 16% to an all-time intraday high at $139.87, on Oct. 31. This rebound was slightly muted, as investors wait to react to third-quarter earnings to be released before the opening bell on Friday. Analysts expect Humana to report that it earned $2.01 per share.

Investors long this stock should consider employing a sell-stop below a key technical level of $133.50, to lock-in longer-term gains.

UnitedHealth Group ($95.01) declined 9.2% from $88.85 on Sept. 9 to $80.72 on Oct. 15 then rallied 19% to an all-time intraday high at $95.67 on Oct. 31, helped by a solid third-quarter earnings beat, reported on Oct. 16.

Investors long this stock should consider employing a sell-stop below a key technical level at $91.35 to lock-in longer-term gains.

WellPoint ($126.69) declined 13% from $124.58 on Sept. 24 to $108.92 on Oct. 15. After this correction, it rallied 16% to an all-time intraday high at $126.69 on Oct. 31, helped by a solid third-quarter earnings beat, reported on Oct. 29.

Investors should use a "good 'til canceled" limit order to book profits on strength to a key technical level at $135.18. If you are a buyer, use a "good 'til canceled" limit order to buy weakness to a key technical level at $108.51. This range of levels should capture the stock's volatility for November.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

 

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