This Insurance Stock Could Be a Short-Term Buy

Anthem stock tends to bounce after tests of its 80-day moving average

Jul 27, 2017 at 2:01 PM
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The shares of insurance issue Anthem Inc (NYSE:ANTM) are down 0.4% at $183.76, extending yesterday's post-earnings drop. ANTM stock is now on pace for its lowest close since May, and recently entered a historically bearish time of year. However, the stock is now pulling back to its 80-day moving average, which has been a short-term "buy" signal for Anthem shares in the past.

Since the November presidential election, the shares of ANTM have soared more than 50%, touching a record high of $194.94 on June 22, despite the undecided fate of Obamacare. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the last four times ANTM stock dropped to within one standard deviation of its 80-day moving average after a lengthy run above the trendline, the shares went on to enjoy a one-week rally three times. In fact, Anthem stock was higher by 1.86%, on average, a week after its last four pullbacks to this trendline, which served as resistance in mid-to-late 2016.

Anthem stock chart


Should Anthem stock once again prove resilient, an unwinding of skepticism on Wall Street could help ANTM shares resume their quest for record highs. Short interest represents more than a week's worth of buying power, at the equity's average pace of trading. Plus, options buyers have been more bearish than usual, as evidenced by Anthem stock's 10-day put/call volume ratio of 2.60 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- higher than 86% of all other readings from the past year.
 

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