Another rally sits ready to move stocks higher on Tuesday as the S&P 500 Index is starting to make a rush at making new highs. Looking at the sector level, the biotech stocks continue to press higher as investors are migrating from the technology sector into other, more relatively valued stocks.
This morning, our scans have been awash with healthcare-related stocks as we’re seeing an increasing number of the stocks within this seemingly hated sector make new highs ahead of the S&P 500 making a similar move. Today’s three big stock charts look at Abbott Laboratories (NYSE:ABT), Aetna Inc (NYSE:AET) and Boston Scientific Corporation (NYSE:BSX), three stocks leading the group that’s pressing to make new 52-week highs. Should you jump on these stocks now?
Abbott Laboratories (ABT)
Abbott Labs shares have been trading in a bull market trend since crossing above their 20-month moving average in January 2017. This, for the most part, has gone unnoticed as the stock has been lost among the mediocrity that has been the healthcare sector. ABT shares are now making another press higher and they look to have legs to run higher.
- Abbott shares are breaking into a new volatility rally as the stock is moving above its top Bollinger Band. ABT stock saw a similar break in June 2017, which resulted in a rally that sparked an 8% rally in the shares.
- Abbott stock is overbought as indicated by the high reading of its RSI indicator. This is a similar situation to what we saw in May when the stock went parabolic as the RSI readings were already elevated. In this case, these volatility rallies tend to push overbought stocks higher regardless as the crowd moves in to buy.
- Volume on the recent rally has been on the rise, indicating that this move should be strong and have some breadth behind it. Currently, our technical model is targeting a move to $57 for ABT shares.
Aetna Inc (AET)
- Volume and higher prices are pushing Aetna shares into a volatility rally of their own as the stock just moved to new highs while breaking above their top Bollinger Band. We saw a similar break and move in April when AET shares of the insurer rallied from $130 to $145.
- Despite a low short interest ratio, the short interest activity on Aetna is indicating that the shorts are covering positions as bets against the stock dropped by 18% in the last report. This additional volume is helping push Aetna to new highs.
- In the event that AET shares do see some selling pressure from their overbought RSI, the stock should find chart support for a consolidation at $160 as represents the price that launched the volatility rally and the previous spike higher in August.
Boston Scientific Corporation (BSX)
- After spending much of the summer consolidating at $27.50, shares of Boston Scientific have now gone into a rapid ascent as the result of a volatility rally triggered by a strong move above the top Bollinger Band.
- In addition to the bullish signal from the Bollinger Band break, shares of BSX moved above their 50-day moving average at the same time that the bullish break occurred. This adds to the magnitude of the intermediate-term signal.
- The rally has the 50-day moving average trend shifting into an intermediate-term bullish outlook. The last time that we saw a similar signal from this consistently successful indicator was in April 2017 as BSX stock initiated a move from $24.50 to $28 before this indicator went back to bearish. We’re targeting a move to $32 on the most recent signal.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
