Buy The Dip On This Healthcare Stock

An unwinding of pessimism from options traders could boost CNC

Deputy Editor
Jun 15, 2022 at 1:43 PM
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The shares of Centene Corp (NYSE:CNC) are a far cry from their April 21, all-time high of $89.92, last seen at $77.18. CNC now sports a 8.3% deficit this quarter, a loss that has ceded the stock's year-to-date breakeven level. Despite this unimpressive technical backdrop, the recent dip has brought CNC to a historically bullish trendline, if past is precedent.

The healthcare stock is now within one standard deviation of its 320-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, comparable moves have occurred four times over the past three years, with the security enjoying a positive one-month return twice, averaging a 6.5% pop. A similar move from its current perch would put Centene stock just over $82 per share.

CNC Chart 2 June 15

A shift in the options pits could fuel the security's comeback. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CNC's 50-day put/call volume ratio of 1.06 sits higher than all other readings from the past year. This indicates long puts have been getting picked up at much faster-than-usual clip.

Echoing this, the stock's Schaeffer's put/call volume ratio (SOIR) of 0.91 sits higher than 91% of other annual readings. This implies short-term options traders have rarely been more put-biased during the past year. 

It looks like Centene stock is already due for a bounce. This is per its 14-Day Relative Strength Index (RSI) of 27.5, which sits firmly in "oversold" territory.

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