Centene Corporation (CNC -$5.78 or -15.46% to $31.60) gapped significantly lower today, negating its prior breakout and falling back into its prior base.  Investors shunned Centene today after Molina Healthcare (MOH -43.48%) announced that it expected a second quarter loss of 15-20 cents a share which is dramatically lower than the expected earnings of 56 cents a share which analysts had forecasted.  As a result of what is commonly called "collateral damage", other stocks in the HMO group got punished.  This reinforices the importance of monitoring group action in your stock selections. 

Centene was featured in this report on Wednesday July 13, 2005 (read here).  At the time it was noted, "provided that the stock does not decline and close back under its June high closes (which would negate the technical breakout action) those who own it may find it reasonable to hang in there.  Of course, losses beyond the usual 7-8% guideline are always grounds for selling and limiting your potential downside."  The July 13th report also added the warning, "Watch closely for the action leading up to the earnings announcement to perhaps yield some clues as to its earnings outlook.  Earnings news commonly leads to excessive volume and volatility, so the weeks ahead are definitely a time for investors to be on guard for surprises."

Thursday's action spoke volumes.  Such a deterioration in fundamentals is considered a clear signal for investors to head for the exits.  The company is slated to report earnings on July 26, 2005, but disciplined investors who manage their risk properly would not be sticking around.

Centene Corporation (CNC -$0.15 or -0.42% to $35.50) fell back toward prior chart highs (hidden by the datablock on the accompanying DailyGraph) while the HMO group fell for a third consecutive session today.  The company appeared as a noteworthy candidate in CANSLIM.net's Mid-Day BreakOuts Report on July 8th (see here) as it rose to new highs on volume greater than 50%+ above average on the session.  The stock had formed a jagged cup-with-handle type of chart pattern, and it appeared to be a buyable breakout in a leading group. The Medical - Health Maintenance Organization group presently ranks 47th on IBD's 197 Industry Groups list. 

Provided that the stock does not decline and close back under its June high closes (which would negate the technical breakout action) those who own it may find it reasonable to hang in there.  Of course, losses beyond the usual 7-8% guideline are always grounds for selling and limiting your potential downside.

In the sequence of the past four quarterly financial reports its sales revenues growth rate has been accelerating, and its annual earnings history is also impresssive.  Centene will release its second quarter 2005 financial results after the close of business on Monday, July 25th and host a conference call on Tuesday, July 26th at 8:30 AM (Eastern Time) to review the results.  Watch closely for the action leading up to the earnings announcement to perhaps yield some clues as to its earnings outlook.  Earnings news commonly leads to excessive volume and volatility, so the weeks ahead are definitely a time for invesors to be on guard for surprises.