Gaps are very bullish in nature and it is not uncommon for that gap to be filled to test its legitimacy. When this occurs and a stock resumes its upward trajectory one can be safe to enter. Below we look at 3 recent examples within the healthcare sector which is looking to reestablish itself as the leader it once was. The IBB is higher 5 of the last 7 weeks and trading between the round 300 and 400 figures. On a weekly basis there was no CLOSES above 400 or below 300.
In our Friday 11/13 Game Plan we looked at ZTS. ZTS a spinoff from PFE in early 2013 and is higher by 52% since inception. On 11/12 it filled the gap from the 11/2 session. On 11/13 it recorded a bullish piercing line pattern and is now higher 4 consecutive days higher by almost 6% and each CLOSED at highs for the daily range. Wednesday it also took out its 200 day SMA and emerged from a long symmetrical triangle. Below is how it was presented in our daily report.
ZTS is a healthcare name that is higher by 4% YTD and 11% over the last one year period. It has produced 4 straight positive earnings reactions with gains of 5.4, .8, .6 and 4.2% on 2/11 (the 8/4 and 5/5 reactions reversed and the August move reversed at the very round 50 figure). The round 40 number has been very supportive on a weekly basis as the weeks ending 8/28, 10/2 and 10/23 all reversed higher firmly after trading intraweek below. The week ending 8/28 reversed 8 handles, 10/2 by 4 handles and 10/23 by 3 handles. Today ZTS filled in a gap from 11/2, the day before the last earnings report, and only its second bullish gap of the year. Enter here.