Tuesday, February 1, 2011

Continucare Corporation (NYSE: CNU) Q1 2011 Analysis

Recent price: 4.07$
P/E Ratio: 11.10
3 month Target Price: 4.75$

Company Description
Continucare provides primary care physician services on an outpatient basis through a network of medical facilities and independent physician affiliates (IPAs) in the State of Florida. Continucare has 18 medical offices equipped with state-of-the-practice technology and staffed with experienced physicians and a comprehensive support staff. In addition, Continucare provides health practice management services to IPAs who practice primary care medicine in South Florida. Continucare assists these physicians with medical utilization and pharmacy management and specialist network development, freeing them to devote more time to patient care.

Confidence Margins
Strong resistance $5.09 (+25%)
Light resistance $4.84 (+19%)
Light support $3.76 (-8%)
Strong support $3.25 (-20%)

This company recently saw a sharp drop in it's stock price that seems to have no particular reason. Taking into account that Continucare provides a very important service and that it's valuation if fairly conservative compared to it's peers in it's sector, an investor should see current price levels as an sign to acquire some of it's publicly traded common stock. There is still some potential downside left so a couple of days might be necessary before opening a position.

Entry strategy
For the cautious investor:
At the time of writing, it is suggested to wait about one or two days before initiating a long position. Keep in mind however that one should buy the stock for 4.25$ or less.

For the risk-taking trader:
The May 2011 5$ call option contract seems to be the right position to take, they can be acquired for 30$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 4.75$, or keep it until 5$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 4.75$, as for the cautious investor.

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