Whether Obamacare is unconstitutional or not is up to the policy makers, but the uncertainty surrounding the matter caused a broad selloff in the healthcare sector. Cigna, Humana, CVS Health and UnitedHealth lost a significant chunk of their respective market caps after the DOJ sided with a December 2018 Texas district court ruling that the Affordable Care Act should be struck down.
Following the news, analysts at Goldman Sachs and J.P. Morgan trimmed their price targets on UnitedHealth citing “fear of policy proposals” that could wreak havoc on the company’s financial results.
On the other hand, where there is risk there is reward. We cannot know what the healthcare chatter is eventually going to produce, but at least we can look for recognizable Elliott Wave patterns on the related stocks. One such pattern can be found on the 2-hour chart of UnitedHealth below.
The chart reveals that UNH’s pullback from $288 in $208 looks like a simple A-B-C zigzag correction with a triangle in wave B. This patterns gives us plenty of reasons to turn bullish on UnitedHealth stock.
A Base has been Formed in UnitedHealth Stock
Triangles are known to precede the last wave of the sequence. In that case, this is wave C down to $208 on April 17th. Once a correction is over, the larger trends resumes. Since UNH was clearly in an uptrend prior to December 4th, 2018, it makes sense to expect the bulls to return.
Another reason for optimism is provided by the fact that the A-B-C retracement developed within the parallel lines of a corrective channel. The lower line of the channel caused a sharp bounce to $232 a share so far.
If this analysis is correct, all the uncertainty in the U.S. healthcare sector has created a good buying opportunity in UnitedHealth stock. The anticipated rally should exceed the previous all-time high, making $300 a share a very realistic target.
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