Cigna: A positive signal-filled chart

Posted Sep 21st 2009 5:20PM by Joseph Lazzaro
Filed under: CIGNA Corp (CI), Stocks to Buy

A late-May conclusion arguing that institutional investors had started to re-commit to Cigna Corp., due to its constructive, staircase chart, virtually no breaches of the 50-day moving average, and adequate earnings outlook, has so far proved to be on-the-mark.

Hence, I'm reiterating my Buy rating for Cigna Corp. (NYSE: CI), first recommended on May 28, 2009 at a price of $21.89. If you bought CI then, you're up about 45%.

Enrollment losses on a probable rise in the U.S. unemployment rate through at least Q1 2010 constitutes one of the bearish stats, but again, I'm arguing that institutional investors are looking down the field -- i.e. to Q2 2010 -- hence the bullish chart.

I've raised the stop to $22, or slightly above the entry point, from $16, to reduce risk. The First Call FY2009/FY2010 EPS estimates for CI are $3.85 to $4.13.

Stock Analysis: Cigna Corp. is a high-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CI now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CI position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: cigna, health, health insurance, HealthInsurance