Watch These UnitedHealth Levels as Stock Rebounds After Plunging to 5-Year Low

UnitedHealth Group (UNH) shares surged Friday after tumbling to a pandemic-era low yesterday following reports that the company is being investigated by the Department of Justice for possible Medicare fraud.

It’s been a difficult several weeks for the health care giant. Last month, the shares plummeted plummeted 22% in a day when the company lowered its full-year profit forecast, while on Tuesday this week the stock dropped 18% on news that CEO Andrew Witty was stepping down.

UnitedHealth shares were up 6% recently at around $290, leading S&P 500 advancers on Friday. Even with today’s gains, the stock has lost more than half its value over the past month as a surge in medical costs compounds other challenges facing the company, including a broader public backlash against the health insurance industry.

Below, we breakdown the technicals on UnitedHealth’s weekly chart and point out major price levels to watch out for.

RSI Signals Oversold Conditions

After staging a decisive close below the 50- and 200-day moving averages in mid-April, UnitedHealth shares have traded sharply lower in a move that has thrust the relative strength index (RSI) into oversold territory.

Moreover, the stock’s significant drop this week has occurred on the highest weekly trading volume since April 1998, signaling selling conviction by larger market participants, such as institutional investors and pension funds.

Let’s point out two major support levels that may act as a trading floor amid the possibility for further declines and also identify crucial overhead areas to track during recovery efforts in the stock.

Major Support Levels to Watch

The first lower level to watch lies at $249. This area will likely attract significant attention near this week’s low, which also closely aligns with a range of corresponding trading activity on the chart between January 2018 and April 2020.

Selling below this level opens the door for a retest of lower support around $212. Investors may seek buy-and-hold opportunities in this region near a horizontal line that roughly connects multiple troughs on the chart from March 2018 to the March 2020 pandemic low.

Crucial Overhead Areas to Track

During recovery efforts, investors should initially track the $325 area. The shares may run into overhead resistance at this level near the August 2020 peak and February 2021 trough.

Finally, the bulls’ ability to reclaim this crucial level could see UnitedHealth shares climb toward $365. Investors who have accumulated shares at lower prices may decide to place sell orders in this location near twin peaks that developed on the chart between November 2020 and January 2021.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.