UnitedHealth Group (UNH) has taken investors on a crazy ride. Once known as a defensive stalwart with the biggest weighting in the Dow Jones Industrial Average, it has become a roller coaster. Shares have tumbled over 60% from their November 2024 highs driven by fundamentals but also marked by an unthinkable shock. Medical cost inflation surged, squeezing margins and forcing guidance lower, while Washington added uncertainty around reimbursements and oversight. At the same time, the killing of UnitedHealthcare CEO Brian Thompson in New York added another layer of uncertainty during an already fragile period for the company and its stock. As the stock sold off, big money stepped in. Berkshire Hathaway built a sizable position, while David Tepper's Appaloosa Management, Michael Burry's Scion Asset Management, as well as Jane Street and Citadel Advisors added exposure, signaling confidence in a turnaround. These are not bad coattails to ride. Now the stock's price action is giving strong technical signals. The set-up looks great from a risk/reward perspective. It appears many of Wall Street's most notable titans are about to be rewarded and so could you as this turnaround goes into full swing. The setup This stock has all the perfect set ups for a turnaround. Granted, it's taking some time and there's been a lot of volatility along the way, but I think we are finally getting an all clear. We have a more definable risk and potentially a great reward. For those that think you missed an opportunity by not buying ahead of earnings, you wouldn't be wrong, but now we've got confirmation not just from earnings but from price action that things are on the up and up. The trend This stock had been mired in a two-year downtrend and finally broken it. We made a higher low on its last trip below $300 and are now safely above all key moving averages. Near term it is slightly overbought based on its current RSI reading, but stocks can remain overbought for an extended period and consolidate at higher levels. Pullbacks to $345 should see buyers step in. Watch the gaps As you can see in this two-year daily chart, price history has a series of gaps. These voids in the charts are created by news events and/or earnings. They can change the trajectory of a trend and provide valuable information. As a trader, they give great levels to manage risk. As a technician, they provide the best set ups over multiple time frames. On the daily chart we see price gaps all over the place. When the stock gapped lower it was generally the beginning of a move that continued in that direction. These price gaps can be used as levels of support and resistance and guide you as they get filled. On downward gaps price accelerated lower and the trend followed in the same direction. Moves would generally last for a quarter. The most recent gap lower was after January's earnings, and we didn't get back above it until just recently. That gap has filled and has become our downside risk level to watch. The price gap above the 50-day moving average was the first positive sign things were turning. Price got back above its 200-day moving average for only the third time in two years as we waited for Tuesday's earnings. We discussed with CNBC Pro viewers on Monday that it was at a make-or-break point and earnings would be the driver . Well, those earnings sure did speak, and we gapped higher. This latest gap is telling us we should be in the clear for a little while. The trade Buy the bounce and use Tuesday's low at $345 as your new support level. That should act as the new floor on any pullback. When shares have gapped we have seen price continue to move in that direction. Better yet, this stock has something to reverse and clear momentum behind it. Look for minimal upside targets to the $375 level. That may be the next pause on its new uptrend. Shares may consolidate in this area as we go through the next several months into July's earnings. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
