UnitedHealth Group (NYSE:UNH) stock has been in a strong bull run in the past few months. After bottoming at $256 in late March, it jumped by nearly 70% to a high of $433. This rally will be put to the test as the biggest health insurance company publishes its financial results later this week.

UnitedHealth Group to Publish its Earnings This Week

UnitedHealth Group has seen a strong surge this year, mirroring the performance of other health insurance companies like Elevance Health, Humana and CVS. 

The rally happened after the Trump administration increased the average Medicare Advantage payments by 2.48%, which is equivalent to $13 billion. That increase was much higher than the proposed payment rate hike of 0.09%.

The increase also happened as UnitedHealth continued to implement a turnaround strategy following months of upheaval that led to the killing of its CEO, and the resignation of the chairman last year.

Its first quarter results showed that its business did well, with the revenue rising to $111.7 billion. Its earnings from operations rose to $9 billion. Analysts expect that its upcoming results will show that revenue was largely unchanged at $110.8 billion, with its earnings per share rising from $4.08 to $4.85. 

Analysts have a mixed outlook on UnitedHealth stock ahead of its earnings. Bank of America recently raised its price target from $450 to $475, while Morgan Stanley increased its target from $453 to $468. HSBC, however, has a price target of $380, which is well below the current share price of $424. Meanwhile, the consensus analyst price target is $410, also below the current trading level.

One potential risk facing UNH stock is that its valuation is significantly stretched such that it is now more expensive than Nvidia (NASDAQ:NVDA) and Micron (NASDAQ:MU). It has a forward PE ratio of 24.8, higher than the five-year average of 23.

UNH Stock Price Has Flashed Some Risky Technicals

The daily chart shows that the UnitedHealth stock has flashed some risky technicals, pointing to a reversal after earnings. It has formed a rising wedge pattern, and the two lines are nearing their crossover. 

The stock has also formed a bearish divergence pattern. As the chart shows, the Relative Strength Index has formed a descending channel in the past few weeks. Similarly, the two lines of the MACD indicator have been in a downward trend in the past few months.

These technicals suggest that the stock will likely have a bearish breakout, potentially to the psychological level of $400.

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