by Serge Berger | February 18, 2014 12:04 pm
All healthcare stocks are not created equal. In fact, the industry is so diverse that it often makes little sense to group these stocks in the same sector.
Currently, although the ubiquitous healthcare exchange-traded fund, the Health Care SPDR (XLV), is trading at fresh all-time highs, its charts don’t look nearly as attractive as those of a handful of individual healthcare stocks that it is composed of. Just like the broader market, the XLV rallied sharply off the early February lows and is increasingly looking near-term overbought.
However, while the following three healthcare stocks also rallied over the past two weeks, each of them displays a much tighter technical pattern than the broader sector chart, and thus look better-positioned for the near to medium-term time frames.
Click to Enlarge First up is one of the largest U.S. healthcare companies; Humana (HUM). On the weekly chart, HUM stock is holding onto its 2009 uptrend line. More importantly, since September of last year, Humana has consolidated its 2012-13 gains around the 2007 resistance line.
On the momentum side, oscillators such as the RSI have more work to do — they are slowly turning back up, but they also have a trend of lower highs since 2011 to overcome.
Click to Enlarge On Feb. 5, HUM stock gapped lower after Humana’s earnings report but quickly bounced off its 200-day simple moving average (red line). After more than a week of consolidating sideways, HUM stock saw healthy follow-through buying last Friday that now leaves shares right at the diagonal resistance line dating back to early December of last year.
Humana also held its lateral blue line as support, and given the step-by-step rally over the past two weeks, HUM stock now looks like a promising bet to move back toward its early-December highs.
Click to Enlarge Biotechnology firm Gilead Sciences (GILD) has enjoyed a nice rally since 2012. However, while the slope is steep through a multiyear lens, it continues to work higher in an orderly fashion on the daily charts.
On the accompanying daily chart, note that GILD stock has for the most part held its 50-day moving average (yellow), most recently on Feb. 7. From November to mid-January, GILD stock built a nice base from which it eventually broke out; since then, it has led to a next base to be built.
Biotech stocks as an industry have seen good rallies in recent weeks, and GILD stock has been lagging its peers. Gilead is now coiling up below immediate-term resistance near $83 — if it can push through that, it could regain upside momentum toward the high $80s.
Click to Enlarge Diversified healthcare company UnitedHealth Group (UNH) rallied more than 3% last Friday to break out of a tight, eight-day consolidation range that took place right atop its 200-day simple moving average (red). UNH stock hadn’t touched its 200-day SMA since March 2013, thus a retest was overdue.
More importantly, however, was that Friday’s rally resulted in the stock not only breaking out of the tight consolidation range, but also out of a bull flag pattern (black parallels), all of which resulted in UNH stock overcoming its 50- and 100-day SMAs.
UnitedHealth now has better upside momentum, which could move the stock back toward its early January highs, and eventually to new all-time highs.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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