UnitedHealth Group - UNH - close: 40.31 change: -0.25

Stop Loss: 36.90
Target(s): 42.00
Current Gain/Loss: unopened
Time Frame: 8 to 10 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
Healthcare stocks have seen a sharp round of profit taking the last couple of days. Just check out a chart of the HMO index. The profit taking may not be over yet and if it continues I'm expecting it to drag shares of UNH back down toward support.

UNH held up reasonably well today as investors reacted to the company's earnings report. UNH reported this morning with a profit of 94 cents a share on revenues of $24.0 billion. Both profits and revenues were better than expected and management reaffirmed their 2011 profit targets and raised their revenue guidance.

Shares of UNH should have support near broken resistance at $38.00. I am suggesting we launch bullish positions on a dip at $38.10 with a stop loss at $36.90. Our multi-week target is the $42.00 level.

Buy-the-Dip Trigger @ $38.10

Suggested Position: Buy UNH stock @ $38.10

- or -

Buy the 2011 March $40 calls (UNH1119C40) current ask $1.74

Annotated chart:

Entry on January xx at $xx.xx
Earnings Date 01/20/11 (unconfirmed)
Average Daily Volume: 5.9 million
Listed on January 20th, 2010