Healthcare plan stocks moved sharply lower Thursday after pharmacy benefit and health insurance provider Cigna Corporation (CI) doubled the estimated impact that COVID-19 would have on its full-year results. The company surprised investors by saying that it now anticipates the pandemic to hit earnings by $2.50 per share, substantially higher than its previous forecast of $1.25 per share. However, Cigna affirmed its annual adjusted earnings per share (EPS) outlook of at least $20.20.

Key Takeaways

  • Cigna now anticipates the pandemic to hit full-year earnings by $2.50 per share, substantially higher than its previous forecast of $1.25 per share.
  • Look for Cigna shares to stabilize around $192.50, where the price finds support from a trendline connecting various peaks and troughs.
  • Watch how Anthem shares respond to the $370 level, where they encounter support from a trading range's lower trendline.

In better news, the Bloomfield, Connecticut-based company topped Wall Street's quarterly top- and bottom-line expectations, delivering a second quarter (Q2) adjusted profit of $5.24 per share on revenues of $43.1 billion. Analysts surveyed had forecast EPS of $4.96 on sales of $41.19 billion. Moreover, the company's total customer relationships and total pharmacy customers, as of June 30, increased 3.6% and 5%, respectively. Through Thursday's close, Cigna stock has a market capitalization of $70.65 billion, offers a 1.73% dividend yield, and is trading nearly 20% lower over the past three months, underperforming the multiline health insurance industry average over the same time by 12%.

After yesterday's earnings report, Cigna shares broke down below a well-established uptrend line and the 200-day simple moving average (SMA) on heavy volume, indicating further short-term weakness. However, traders should look for the stock to stabilize around $194, where the price finds support from a trendline connecting various peaks and troughs over the past 20 months. Furthermore, the relative strength index (RSI) has moved deep into oversold territory, increasing the chances of a reversal back to the upside at crucial chart support.

Chart depicting the share price of Cigna Corporation (CI)

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The relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset.

One of Cigna's key rivals, Anthem, Inc. (ANTM), also slipped after its competitor's pandemic impact caution. Below, we take a closer look at the stock and identify significant chart levels to watch.

Anthem, Inc. (ANTM)

Anthem provides health insurance and medical benefits to roughly 44 million medical members, offering employer, individual, and government-sponsored coverage plans. The $91.48 billion company, which also recently warned about mounting COVID-19 costs, posted quarterly earnings of $7.03 per share, beating analysts' expectations of $6.34 per share. Management cited higher sales and robust Medicare and Medicaid businesses for the better-than-expected result. Specifically, the health insurer's government segment grew 16.4% from the year-ago quarter, helping boost the top line by 14.1%. Meanwhile, the company increased its total customer relationships and pharmacy customers during the period by 3.6% and 5%, respectively. As of Aug. 6, 2021, Anthem stock has gained 17.31% on the year but has shed 3.1% over the past three months.

Since early May, the Anthem share price has ranged within a $30 channel, providing several long and short trading opportunities. Amid the current weakness, market participants should watch how the stock responds to the $370 level, where it encounters support from the range's lower trendline. If buyers defend this area, consider positioning for a move to the channel's opposing side.

Chart depicting the share price of Anthem, Inc. (ANTM)

TradingView.com

A channel graphically depicts the peaks and troughs of a security's price over a period of time. If there is an observable symmetry in the oscillation, then it is considered to be a valid price channel that can be used as a tool for stock analysis.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.