Healthcare: Getting healthier but not cured yet

April 18, 20162 Comments

Somebody asked me if I thought healthcare was looking bullish. I took a look at the weekly chart for the S&P Healthcare index, and here are my thoughts:

  • Downtrend is on the cusp of breaking, but has NOT broken yet – note the lower highs and lows, along with a trendline challenged but not broken. The sector remains below its 40 week (200 day) MA.
  • MACD is showing some positive movement—which is a longer termed momentum indicator.
  • Despite the recent strength on the sector, it’s not yet outperforming the broader S&P 500 index, as evidenced by the comparative strength study (middle pane)
  • Near termed momentum is bullish but approaching overbought.

healthcare

 

Not shown on this chart is moneyflow- as the S&P index charts don’t report volume for the sector. However, I note that some of the ETF’s following the index are seeing positive moneyflow lately. That’s to be expected given the recent rally.

Conclusion

I’d take a position in this index through a good ETF or a well-chosen stock or two IF we see a definitive break of the downtrend and continued positive moneyflow on the ETF or stock chosen. I’d ideally like to see comparative strength pick up vs. the broad markets. That could be a thorn in the sectors side. The sector isn’t yet ready to buy—but it’s getting closer. Keep an eye on this one.

 

Keith on BNN Television today: Monday April 18th at 1:00pm

I am on BNN today for the 1:00pm show.

If you wish to phone in with questions on stocks for me during the live taping  (1pm – 2pm) , you can CALL TOLL-FREE 1-855-326-6266.

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2 Comments

  • Two questions:
    1) you mention S&P 500 so for the health care sector would you only invest in a US ETF/stock? If so what ETF might be appropriate, and if canadian health care is up for consideration is there one that might be hedged?
    2) Are you not concerned with investing in US equity given the positive momentum of the Cdn$ vs the US? If there is say a 4% gain in the currency it could easily wipe out some gains at the equity level.
    Thanks

    Reply
    • XHC is an ETF offered by iShares that covers global healthcare (mainly US) and is currency hedged–best of all worlds. It has not broken out yet.

      Reply

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