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Though Obamacare continues to be a chilly topic in Washington, it made for a hot trade this week.
Immediately following the Supreme Court’s decision to approve the President’s controversial healthcare overhaul, the shares of Molina Healthcare (NYSE: MOH) blasted higher.
Obamacare helps this business because Molina Healthcare provides Medicaid services for low income families. The Court’s decision could send the shares to $37.
However, in the near term I expect $29 (blue line) from the stock.
This chart shows the price of MOH shares along with an important resistance area for you to monitor.
The shares are above $24 resistance, which was a key price area to overcome and should allow it to hit $29 over the next month.
Molina Healthcare received a big boost last week after competitor Amerigroup (NYSE: AGP) was bought out by WellPoint (NYSE: WLP). Though the shares of AGP jumped 38% on the takeover news, MOH popped 17%.
This jump likely creates a floor for the shares. Since the pop came on high volume, traders can move their stop loss to $22.50 (blue arrow).
I expect the bullish momentum will eventually send the shares to $29 and expect this area to be difficult resistance. Traders should move stop losses up once the shares attain that price and investors should be watching for a low-volume pullback to $27 for their next buying opportunity.
Equities mentioned in this article: MOH, AGP, WLP