UnitedHealth Group (UNH) shares surged Friday after Warren Buffett's Berkshire Hathaway (BRK.A, BRK.B) revealed a stake in the embattled healthcare giant.
The stock was up over 11% in recent trading, helping lift the Dow Jones Industrial Average to a new high. Still, shares of UnitedHealth have shed over a third of their value since the start of the year, weighed down by worries about investigations into the company's Medicare billing practices, former CEO Andrew Witty's sudden departure in May, and a downbeat forecast amid higher care costs.
Below, let's take a closer look at UnitedHealth's chart and use technical analysis to identify major price levels worth watching out for.
After bottoming at the start of August, UnitedHealth shares have continued to gain momentum, recently breaking out above a steep downtrend line that extends back to the April peak.
Moreover, the rally in the stock has coincided with the relative strength index (RSI) moving back above its neutral threshold, indicating accelerating buying interest.
Let's identify three major overhead areas to eye if the shares continue to climb and also identify a key zone of support to watch during potential pullbacks.
The first overhead area to watch sits around $325. This area on the chart could provide overhead resistance near the top of a countertrend trading range that formed on the chart between May and July.
A close above this level could see the shares climb toward $380. Tactical traders who accumulate shares near this month's low may look for exit points in this location near a series of price activity just prior to the mid-May stock gap.
Further bullish momentum opens the door for a retest of overhead resistance at $440, currently just below the falling 200-week moving average. Investors may decide to lock in profits in this region near the prominent February low and a minor upswing in the shares during late April.
During pullbacks in UnitedHealth shares, it's worth keeping an eye on a key zone of support between $250 and $235. Bargain hunters could look for buying opportunities in this region near the May and August troughs.