I get questions about healthcare on my BNN shows and on this blog. Is the sector due to rally? The sector has been a laggard for quite some time, as you can see on this chart. The iShares IXJ global healthcare ETF has been forming a giant symmetrical triangle since early 2015. As with any consolidation pattern, the 40 week (200 day) and 10 week (50 day) MA’s are useless as timing vehicles. The market is meandering around the MA’s.
As the IXJ neartermed (daily) chart below shows us, the sector is once again at a point where it may round over within the larger consolidation pattern. Momentum on the daily charts looks a little toppy and seems to be at a point of rounding over. When viewing an ETF, it should be kept in mind that volume and moneyflow is somewhat unique to the ETF itself—it doesn’t necessarily reflect that of the index. However, the S&P healthcare index chart (not shown) doesn’t post volume, so I’m forced to comment only on the ETF volume patterns. Either way, volume does tend to pick up in a sector ETF if the sector itself is doing well – and it declines if market participants are less interested in that sector. Despite the thin volume on this ETF, you can see that moneyflow (bottom pane) and moneyflow momentum (top pane) are relatively positive. Comparative relative strength vs. the S&P 500 is still weak (3rd pane from the bottom). Seasonality tends to be best in the late summer for this sector.
My thoughts on this sector is that there are few reasons to buy into it at this time. The big picture is neutral, and the neartermed view is a bit overbought.
Keith on BNN “MarketCall Tonight” –Today Feb 6th at 6:00PM
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