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What Does HealthEquity Know That Wells Fargo, JPMorgan Don't?

Since 2015, Wells Fargo (WFC), JPMorgan Chase (JPM), U.S. Bancorp (USB) and other large financial institutions have been exiting the health savings account (HSA) business. But Utah-based HealthEquity (HQY), one of the nation's largest HSA administrators, continues to expand.

Health savings accounts help people manage and lower their health insurance costs by making tax-free contributions into an account that can be used to cover expenses. Plus, balances roll over year after year and the individual owns the money, meaning they can take the balance with them if they change jobs or retire.

Despite still-existing fears that ObamaCare regulations may curtail or eliminate HSAs, health savings account deposits and investment assets have continued to grow in recent years, reaching $30.2 billion in 2015 – about triple the amount in 2009.

But since the sums pale in comparison to that of 401(k)s and other retirement accounts, Wells Fargo and other big banks have decided to focus on the latter.

HealthEquity, however, has used the big banks' exit as an opportunity to expand, including picking up a total of 195,000 HSA accounts with $453 million in assets from M&T Bank (MTB) and Bancorp (TBBK).

Working with 80 health plan partners and 33,000 companies across the U.S., HealthEquity now services 2.2 million HSAs with $4 billion under management.

Healthy Profits

Boosted by a 24.9% pretax profit margin, HealthEquity sports strong three-year annual growth rates for both earnings (69%) and sales (42%). EPS growth has averaged 52% over the last three quarters.

HealthEquity ranks No. 1 within the health care services industry group, while Cotiviti (COTV), which rose sharply following its May IPO, ranks No. 3.

The company is set to report fiscal 2017 Q2 numbers on September 6.

The Pressure's On

At the end of last year, the stock fell into a deep decline before finding its footing in February. It's recovered nicely, finding good support along the 10-week line, and is now working on a first-stage flat base a 31.79 entry.

On Tuesday, HealthEquity reclaimed its 50-day line in heavy and rising volume, and managed to edge higher on Wednesday despite a sell-off on the Nasdaq and S&P 500.

But with market outlook now shifted from 'confirmed uptrend' to 'uptrend under pressure,' it's riskier to make new buys.

At a minimum, be extra picky about establishing new positions in this environment, and look for volume to spike at least 40% on the day of an attempted breakout.