Healthcare plan stocks moved sharply lower Thursday after pharmacy benefit and health insurance provider Cigna Corporation (CI) doubled the estimated impact that COVID-19 would have on its full-year results. The company surprised investors by saying that it now anticipates the pandemic to hit earnings by $2.50 per share, substantially higher than its previous forecast of $1.25 per share. However, Cigna affirmed its annual adjusted earnings per share (EPS) outlook of at least $20.20.
Look for Cigna shares to stabilize around $192.50, where the price finds support from a trendline connecting various peaks and troughs.
Watch how Anthem shares respond to the $370 level, where they encounter support from a trading range’s lower trendline.
In better news, the Bloomfield, Connecticut-based company topped Wall Street’s quarterly top- and bottom-line expectations, delivering a second quarter (Q2) adjusted profit of $5.24 per share on revenues of $43.1 billion. Analysts surveyed had forecast EPS of $4.96 on sales of $41.19 billion. Moreover, the company’s total customer relationships and total pharmacy customers, as of June 30, increased 3.6% and 5%, respectively. Through Thursday’s close, Cigna stock has a market capitalization of $70.65 billion, offers a 1.73% dividend yield, and is trading nearly 20% lower over the past three months, underperforming the multiline health insurance industry average over the same time by 12%.
After yesterday’s earnings report, Cigna shares broke down below a well-established uptrend line and the 200-day simple moving average (SMA) on heavy volume, indicating further short-term weakness. However, traders should look for the stock to stabilize around $194, where the price finds support from a trendline connecting various peaks and troughs over the past 20 months. Furthermore, the relative strength index (RSI) has moved deep into oversold territory, increasing the chances of a reversal back to the upside at crucial chart support.
The relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset.
One of Cigna’s key rivals, Anthem, Inc. (ANTM), also slipped after its competitor’s pandemic impact caution. Below, we take a closer look at the stock and identify significant chart levels to watch.
Anthem provides health insurance and medical benefits to roughly 44 million medical members, offering employer, individual, and government-sponsored coverage plans. The $91.48 billion company, which also recently warned about mounting COVID-19 costs, posted quarterly earnings of $7.03 per share, beating analysts’ expectations of $6.34 per share. Management cited higher sales and robust Medicare and Medicaid businesses for the better-than-expected result. Specifically, the health insurer’s government segment grew 16.4% from the year-ago quarter, helping boost the top line by 14.1%. Meanwhile, the company increased its total customer relationships and pharmacy customers during the period by 3.6% and 5%, respectively. As of Aug. 6, 2021, Anthem stock has gained 17.31% on the year but has shed 3.1% over the past three months.
Since early May, the Anthem share price has ranged within a $30 channel, providing several long and short trading opportunities. Amid the current weakness, market participants should watch how the stock responds to the $370 level, where it encounters support from the range’s lower trendline. If buyers defend this area, consider positioning for a move to the channel’s opposing side.
A channel graphically depicts the peaks and troughs of a security’s price over a period of time. If there is an observable symmetry in the oscillation, then it is considered to be a valid price channel that can be used as a tool for stock analysis.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.