The sharp 3.3% gain in the
(SHA:000001) overnight has not yet translated to gains in Europe,
where most of the major averages are a bit lower in early trading.
The US market closed mixed on Friday, but higher for the week.
The technical outlook did improve last week, especially on the
(INDEXRUSSELL:RUT), suggesting that the worst of the selling may be
over. Clearly, the action over the next few weeks is likely to be
choppy with the focus on the September 18 FOMC meeting.
One of my favorite sectors since 2012 has been health care, as the
Select Sector SPDR Health Care ETF
(NYSEARCA:XLV) has been one of the leaders in this double-digit
year, as it is up almost 27% so far this year. This compares with a
17.73% YTD for the
(NYSEARCA:SPY). XLV was one of last week's leaders, also up 2%,
with SPY up just over 1.4%.
XLV looks as though it is ready to resume its uptrend and these
three stocks, in this market leading sector, look attractive for
Click to enlarge
: The Select Sector SPDR Health Care dropped to a low of $48.82 at
the end of August, which was a decline of 5.2%, from the high at
- The 127.2% Fibonacci retracement target is at $52.30, with
the weekly starc+ band at $52.55.
- The relative performance tested its weighted moving average
(WMA) in the middle of August and broke through its downtrend,
line b, in the middle of August.
- The relative strength (
) line has long term support at the uptrend, line b.
- The on-balance volume (OBV) made convincing new highs with
prices in August and only had a minor pullback.
- The OBV is well above its WMA and support at line c.
- The daily OBV (not shown) is also positive.
Laboratory Corp. of America
- The monthly pivot of XLV is at $49.85 with further support at
) is an $8.85 billion medical laboratory company that hit a high of
$101.69 in June and then made its correction low of $95.36 in July.
This was a drop of 6.2% from the highs.
- The low two weeks ago was $95.50 and it closed last week
above the prior two week highs.
- The weekly
moved back above its WMA as it appears to have completed its
bottom formation, line h.
- A move in the RS line above the downtrend, line g, will
confirm that it is again a market leader.
- The weekly OBV broke through resistance in June, line i, and
has now turned up from its WMA.
- The OBV has stronger support at line j.
Health Net, Inc.
- There is initial support now at 97.61 and the quarterly pivot
with further at $96-$96.49.
) is a $2.57 billion provider of managed health care plans that had
a high in July of $33.70. The stock closed up 7.6% last week.
- The monthly projected resistance is at $34.88, with
resistance from 2012 at $36.90, and then at $41.22.
- The relative performance shows a pattern of higher lows, line
c, with key resistance at line b.
- The daily RS analysis appears to have already completed its
- The weekly OBV made new rally highs in July, as it has been
acting stronger than prices.
- The OBV closed above its WMA and it held well above support
at line d.
- There is initial support now at $31-$31.50 with the 20-day
EMA at $30.86.
WebMD Health Corp.
- The quarterly pivot is at $30.71.
) is $1.64 billion company that provides health care information to
consumers as well as health care professionals. The stock put in a
strong performance last week on expanding volume.
- The 50% Fibonacci retracement resistance is at $35.84, which
is calculated from the 2011 high at $58.55.
- The 61.8% resistance level is at $41.20.
- The relative performance broke its downtrend, line f, in
- The RS line has been in a steady uptrend for most of the
year, line g.
- The weekly OBV overcame resistance, line h, in June.
- The OBV has not turned up from its WMA.
What it Means:
- There is minor support in the $32 area with further at $30.74
The technical action for the health care sector is positive from
both a monthly and weekly perspective. The action last week
suggests that the correction in the Select Sector SPDR Health Care
ETF is over.
All of these three health care stocks look positive based on the
weekly and daily technical indicators. We may not see enough of a
setback in Health Net and WebMD and have to adjust the buy zones
and stops later.
How to Profit:
- For Laboratory Corp., go 50% long at $97.88 or better, and
50% at $96.74 with a stop at $94.83 (risk of approximately
- For Health Net, go 50% long at $31.48 or better, and 50% at
$30.88 with a stop at $29.48 (risk of approximately 5.4%).
- For WebMD, go 50% long at $32.18 or better, and 50% at $31.32
with a stop at $30.33 (risk of approximately 4.4%).
should be long the Select Sector SPDR Health Care at $38.50 with a
stop at $47.74.
Editor's Note: This article was written by Tom Aspray of
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