The Affordable Care Act, also known as Obamacare, was seen as a positive catalyst for some health insurance providers and the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF).
That proved to be the case for much of this year as IHF sits with a year-to-date gain of 28.7%, but investors have been taking profits in IHF and some of the ETF’s constituents as controversy surrounding Obamacare has swirled in recent weeks. [This Obamacare ETF Looks Promising]
News of Americans losing health coverage, being forced to pay for coverage when the aim of Obamacare was to lower costs and the fiasco pertaining to government enrollment web sites have had a hand in pressuring shares of IHF and its constituents.
Home to 49 stocks and $377.3 million in assets under management, IHF has lost almost 3% since Oct. 17. Making matters worse is looming technical weakness in some of the ETF’s major holdings.
Dow component UnitedHealth (NYSE: UNH) “was near all-time highs on Oct. 16, but after earnings were announced the next day it ‘gapped’ down for a 5.1% loss and a breakdown below its rising 2013 trendline. It got worse the next day with an additional 3.7% loss and a breakdown below a three-month trading range,” reports Michael Kahn for Barron’s.
Kahn also highlighted technical weakness in shares of Aetna (NYSE: AET) and Cigna (NYSE: CI). UnitedHealth, Aetna and Cigna are three of IHF’s five largest holdings and combine for almost 26% of the ETF’s weight.
Weakness in those names and a few others has IHF trading slightly below its 20- and 5-day moving averages. If the ETF fails to hold support just below $87, it could fall back to its 200-day line, implying possible downside of 6.5% from current levels.
iShares U.S. Healthcare Providers ETF
ETF Trends editorial team contributed to this post.