Buy United Health Group And Sell Short American Airlines

The S&P has retraced more than 38.2% and 50% of its prior decline. The likelihood of a retest of the March low has lessened considerably. Sentiment has recovered to lesser degree than has price. That is, sentiment has not been recovering from bearish levels despite the price rise. This is the type of sentiment-price environment that sustains market recoveries. Early in the week, hedgers were holding an all-time record amount of index equity futures contracts. Over the last ten years, large long positions have coincided with strong S&P rallies. The index will likely consolidate at the opening of the trading week followed by further recovery.

The United Health Group weekly cycle bottoms on the 22nd and tops on May 11th. In the last year, six of seven buy signals have been profitable. Relative strength bottomed in the autumn of 2019 and has remained strong through the decline. The stock is in the health sector which has risen to the number one place in the relative sector rankings. The stock is likely to rise to new highs above $300 per share.

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The American Airlines weekly cycle topped on the 14th and hits a low on June 23rd. All five sell and buy signals have been successful in the prior 12 months. A double top in momentum has formed and relative strength has been weak. The $9 level is the downside price target.

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