Trading Nation

Bet on this Dow laggard as a second-half play: Technical analyst

Bet on this Dow laggard as a second-half play: Technical analyst

The prognosis is positive on UnitedHealth Group.

That's at least according to technical analyst Mark Newton, founder of Newton Advisors. With UnitedHealth shares down nearly 14% from their 52-week highs made in December, Newton said Friday that this Dow dud is poised for a breakout.

"It's not always smart to look for laggards and think you're going to see immediate mean reversion," he told CNBC's "Trading Nation."

But UnitedHealth is "starting to show real progress" based on its technical charts, the analyst said.

"I think we're starting to [see] increasing signs of this stock breaking downtrends from last year, [and we're] heading into a very seasonally bullish time for this stock, so I do like UnitedHealth," Newton said. "I think this is one to bet on for the second half of 2019."

Goldman Sachs, down 15% from the 52-week high it reached last August, is also ready to turn, according to Newton.

"The financials are starting to show recent evidence of outperformance in the last few days and now evidence of, potentially, yields bottoming out and some signs that the economy might be OK in the short run," he said. "You've seen breakouts in [the Financial Select Sector SPDR Fund] and, of course, Goldman Sachs has just also broken out of a downtrend and potentially could close at the highest level of the year this week.

All in all, Newton predicted "further progress in the weeks and the months ahead" for UnitedHealth and Goldman Sachs, and Strategic Wealth Partners President and CEO Mark Tepper was with him on the former.

"UnitedHealth is definitely my favorite pick here," Tepper said in the same "Trading Nation" interview. "You've got a company with unbelievable fundamentals that's being punished because of all this political noise. There's this possibility of Medicare for All becoming reality, but, quite frankly, I think the likelihood of that happening is very, very low. I mean, we're talking ... less than 10% or so. You'd have to see a full-blown Democratic sweep in the election next year."

In Tepper's view, investors with a longer-term time horizon would do well to buy shares of UnitedHealth, the country's largest private health insurer.

"What you're able to get here, if you can ride out the next year and a half or so, is a really solid company on sale," he said. "You're getting, basically, the industry leader in the managed-care space. They've got that vertically integrated business model that all their competitors are trying to recreate and replicate. And you're getting growth. I mean, what you have here is a company that's trading at a discount to the broad market, but they're growing earnings twice as fast as the overall market. So, it's a great play here. I think, at this price, it makes a lot of sense."

Shares of UnitedHealth and Goldman Sach both gained less than 1% in Friday's trading session.