Citi Says "Buy" Anthem Stock as Bull Signal Sounds

Options traders are upbeat, too

by Karee Venema

Published on May 10, 2019 at 2:45 PM

Citigroup chimed in on insurance stocks today, tagging the managed care organization (MCO) sector as a "buy" on overblown "Medicare for All" fears. Amid a "favorable" risk/reward backdrop, the brokerage firm upgraded Anthem Inc (NYSE:ANTM) to "buy" from "neutral," sending the security up 0.9% at $268.64.

Looking closer at the charts, ANTM stock bottomed at a 10-month low at $227.16 on April 17, as healthcare stocks sold off on anxiety surrounding potential policy changes out of Washington D.C., as well as growing attention to the Medicare for All plan proposed by Senator Bernie Sanders, I-Vt. The shares have since gained more than 18%, and are flashing a technical signal that could mean even more upside on the horizon.

Specifically, Anthem is trading within one standard deviation of its 320-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been two other times ANTM has tested support here in the past three years after a lengthy stretch above it -- defined for this study as the stock being above the trendline 60% of the time in the last two months, and eight of the previous 10 trading days -- resulting in an average one-month gain of 23.5%. Based on its current perch, another move of this magnitude would put the equity near $332.25 -- well above its Feb. 25 record high of $317.99.

anthem stock daily price chart on may 10

Options traders have been targeting a big move to the upside. Per Trade-Alert, the June 280 call is home to peak open interest on Anthem, and it looks like most of the positions here were bought to open earlier this month. If this is the case, call buyers expect ANTM to break out above $280 by June options expiration.

Short sellers, on the other hand, have been actively betting against the insurance stock. Short interest on Anthem surged 40.9% in the most recent reporting period to 1.1 million shares. The bearish bandwagon is far from full, though, considering this amounts to just 1.7% of the security's available float.

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