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After an arduous political and judicial process, the Supreme Court let Obamacare mostly stand in a 5-4 vote. Though the ruling was great news for the Obama Administration, the stock market gave a muted response. Only a few healthcare stocks managed to pop last week, indicating more gains could be around the corner.
Immediately following the Court’s decision, the shares of Molina Healthcare (NYSE: MOH), HCA Holdings (NYSE: HCA) and Community Health Systems (NYSE: CYH) ripped higher.
While all three stocks are in a position to post additional gains following their big moves last week, MOH – a provider of Medicaid solutions for low income families – appears to have the most upside ahead.
After cresting to an all-time high just below $37 in February, the shares have been in a major decline that has stabilized in the $21-23 range for the past three weeks. That tells me that the stock has major upside (up to 55% on a return to the February high) given last week’s ruling.
While $37 is not my near-term target, it’s possible. MOH has shown the ability to make huge rallies (and huge declines) in a short span of time. Extreme moves can be painful if positioned incorrectly and spectacular if positioned correctly. In the case of MOH, proper positioning appears to favor the bullish side.
So long as $21 support (blue arrow) holds, I expect the shares to keep battling around the $24 (blue line) resistance area. That’s an important zone to monitor and one that’s not too far from current prices.
It’s important for the stock to move above the $24 line if it’s to end the sluggish trend of the past several months. Should the shares claw their way above that price, the next resistance point is just below $29, or 25% higher than the recent price.
The vote last Thursday was a historic event for the nation and President Obama. However, the shareholders of CYH, HCA and especially MOH also have reason to celebrate the occasion.
This chart shows the price of MOH shares along with an important support area for you to monitor
Equities mentioned in this article: CYH, HCA, MOH