Stock Picks: Hospital Corporation of America and Helmerich & Payne Incorporated

The S&P 500 (SPX) dropped to as low as 2,612.67 on April 25, 2018 before bulls started buying the dip. This provoked a rally to 2,677.35 on April 27. Bears then flexed their muscles and drove the index down to 2,669.91 to end the week. Unless SPX can stay above 2,680 soon, it is in real danger of a breakdown below 2,600.

As the index continues to show weakness, let’s look at names flashing signs of strength.  

HCA – Hospital Corporation of America

Hospital Corporation of America is an American company that owns and operates hospitals and related healthcare facilities. Founded in 1968, it now has 177 hospitals, 119 freestanding surgery centers, and 121 access centers in the United States and the United Kingdom. The company’s subsidiaries include Sarah Cannon Research Institute, London Bridge Hospital, West Florida Healthcare, Healthone Colorado, and St. Mark’s Hospital, among others.

Technical analysis show that HCA has taken out resistance of 90. This triggered the large cup and handle continuation pattern on the weekly chart. The breakout was validated by a surge in price and volume that catapulted the stock to as high as 106.84. Since then, the stock has been correcting to shed overbought readings. This could be a good chance for you to buy the dip.

Furthermore, fundamental analysis reveals that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of HCA is 16.16. Based on the PE ratio, it could be argued that the stock is not expensive but it is not yet fairly priced. If you also consider that its five-year maximum PE ratio is 20.70, the figures suggest that HCA has some upside potential.

The strategy is to buy on dips as close to 90 as possible. If the market respects this level, it will most likely consolidate for some time before climbing to our target of 115. The process may take more than six months.

Weekly HCA Chart

Monthly HCA Chart

As of this writing, the Hospital Corporation of America (HCA) stock is trading at 96.25.

Summary of Strategy

Buy: Buy on dips as close to 90 as possible.

Target: 115

Stop: 86

HP – Helmerich & Payne Incorporated

Helmerich & Payne, Incorporated is an American petroleum contract drilling company founded in 1920. Operating on U.S. land, offshore, and internationally, the company contracts their drilling equipment to other oil and gas companies. They also  engage in the research and development of rotary steerable technology, as well as own, develop, and operate commercial real estate.

Technical analysis show that HP is poised to take out resistance of 75. This would trigger the large double bottom reversal pattern on the weekly chart. To successfully breach the resistance, the stock must generate at least 5 million shares of HP on the daily chart. Those who bought the bottom are very likely to take profits at the resistance. The stock needs buyers to accommodate the increased selling pressure.

In addition, fundamental analysis reveal that HP’s trailing twelve months (TTM) PE ratio stands at 17.62. It may look like the stock is already fairly valued but it’s five-year maximum of 75.18 suggests that it has a lot of room to grow.

The strategy is to buy the breakout as long as HP prints the required volume. Once bulls complete the reversal, the stock will most likely create a base above 75 before crawling to our target of 115.

The process may take more than six months.

Daily HP Chart

Weekly HP Chart

As of this writing, the Helmerich & Payne Incorporated (HP) stock is trading 71.67.

Summary of Strategy

Buy: Breakout at 75 with volume of 5 million shares.

Target: 115

Stop: Close below 70.


Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.