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S&P 500 Shows This Solid Action; This Dow Jones Stock Triggers 2 Key Sell Signals

The Dow Jones Industrial Average, S&P 500 and Nasdaq exemplified resilience in stocks today. More to the point, all three key equity benchmarks dusted off early weakness to turn what at first looked to be a worrying session into a routine pause in a confirmed market uptrend.


However, Dow Jones Industrial Average component UnitedHealth (UNH) left a very sour taste in shareholders' mouths on Wednesday. The health insurance behemoth dropped more than 13 points, or 5%, and hit as low as 248.94 in double average volume.

UnitedHealth likely fell on news that the Democrat-majority U. S. House of Representatives is pushing for a universal health care plan that would essentially make private health insurance plans irrelevant.

The S&P 500, down as much as 0.6% in the early going, cut the loss to less than 2 points by day's end to around 2792. The key index now enjoys an 11.3% advance since Jan. 1.

Early data showed volume rose on the NYSE, but the puny drop the large-cap benchmark meant there was no distribution day.

As seen in the latest Big Picture column, the S&P 500 currently shows three distribution days over the past five weeks; a decent number, but typically not enough to derail a tradable stock market rally.

The Dow Jones fell nearly 0.3%. The Nasdaq composite edged up less than 0.1%.

The Innovator IBD 50 (FFTY) fund rallied nearly 0.5%. At 32.97, the ETF is smashing the S&P 500's ex-dividend return with a 19.4% gain year to date.

2 Sell Signals For This Dow Jones Component

UnitedHealth triggered a key defensive sell signal for recent new shareholders.

By dropping below both the 50- and 200-day moving averages in one fell swoop, the heavy-volume decline gave a strong hint that top institutional investors decided to dump shares big time and take major profits off the table.

The stock had been forming a cup with handle that created a 272.53 buy point. Had the stock surpassed that proper entry and broken out, buyers would have been forced to sell today. Why? The stock fell more than 7% below the proper buy point, triggering the golden rule of investing. That is, always keep your losses small — capped at 7% or 8% — in any equity investment.

The Minnesota-based company has been a true powerhouse since the stock market's major bottom in 2009. A new base can be expected to form.

The IBD Composite Rating for UnitedHealth has come down in recent months. On Jan. 7, the megacap health care play showed an 85 score on a scale of 1 (the worst) to 99 (the best). Through Wednesday, that rating fell to 80.

The Composite Rating factors in earnings and sales gains, changes in profit margins, the quality of fund sponsorship and recent movement in the daily and weekly price-and-volume action. Read more about how to use the Composite Rating in this Investor's Corner.

Analysts surveyed by Thomson Reuters see earnings rising 18% to $3.60 a share in the first quarter of this year. That would following a superb string of healthy increases in the past eight quarters of 31%, 26%, 23%, 23%, 28%, 28%, 28% and 27%.

UNH's revenue is expected to rise 8% to $59.69 billion. That would mark a slowdown from year-over-year gains of 13%, 12%, 12% and 12% in the prior four periods.

These Top Growth Stocks Are Outperforming UnitedHealth In 2019

Inside the IBD 50, 14th-ranked budget-friendly gym chain Planet Fitness (PLNT) made a new high of 61.90 but gave up virtually all of its sharp gain. Shares ended more than 2% higher, however, and its long-term uptrend remains intact.

The midcap growth stock leader posted a 42% rise in Q4 profit to 34 cents a share. Revenue grew 30% to $174.4 million. That marked the fourth quarter in a row of 30%-plus top-line increases.

Leading Big Cap Stocks Outside The Dow Jones

Inside the IBD Big Cap 20, Veeva Systems (VEEV) struck a new high of 124 but then reversed sharply in more than double usual trade. The expert in data management, sales and marketing and customer management software for the drug industry reported strong fiscal Q1 results.

Veeva ranked No. 1 within the Big Cap 20 in the latest IBD Weekly. It also took the top rung as of Wednesday's market open.

The stock remains well beyond the 5% buy zone after a January breakout past a 101.49 proper buy point in a base that features the critical elements of a double bottom.

Veeva's earnings jumped 87% to 45 cents a share on a 25% lift in revenue to $232.3 million, the biggest amount for any single quarter in the company's history.

Net margin spiked more than 1,000 basis points higher to 30.6%.

Please follow Chung on Twitter at @IBD_DChung for more on growth stocks, true market leaders and financial markets.


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