While healthcare can still be boast being the best performing major S&P sector on a YTD basis, it is slipping on shorter term durations. For example over the last month the XLV is lower by more than 1.5%, and is behind real estate, which has RISEN more than 4% in the timeframe, utilities, materials, staples and financials. The chart below overall however shows a nice ascent when compared to the S&P 500. JNJ and PFE are the two largest names in the ETF and each trade just 1 and 5% from most recent 52 week highs respectively. MRK is just 2% from its own most recent highs but did complete an ominous, bearish evening star pattern today. The XLV has now made four lower highs since the 10/1 session, and the volume trends are souring with the weeks ending 10/12 and 10/26 losing 3.4 and 4.5% declining in heavy trade. The last 3 weeks have CLOSED in the upper half of the weekly range, but the volatile trade as of late is concerning. Contrast the action of the 10 of 13 week winning streak, in very taut trade the weeks ending between 7/6-9/28 and one sees why the worrying may get worse before it gets better.
Small Cap Healthcare at Inflection Point:
Much has been made of the small caps in general as the Russell 2000 in now in negative territory. Regarding the small caps in the healthcare arena the PSCH is worth a look. Below is the chart, that has produced multiple bullish candlesticks, and that could be a problem as it still lingers near the round 120 number which the ETF has been defending well. To be balanced it has outperformed the larger cap names thus far YTD as the PSCH has gained 24% and the XLV 11%. That being said it still traded below its 200 day SMA and has the look of a bear flag formation, which if the 120 level is broken to the downside, and as always CLOSED underneath there could be a measured move to the very round par number. It has lost ground 8 of the last 11 weeks and is 16% off most recent 52 week highs, and just before this recent soft patch the ETF rose impressively 40 of 54 weeks ending between 8/25/17-8/31/18. Problem is that is has not responded to the plethora of bullish candles. That being said wait for PRICE confirmation before entering.
The longer the base the greater the space. When you add to that the round number theory, the “cluster of evidence” heats up. Below could be a good example of just that. Here is the chart of AMPH and how it was profiled in our 11/12 Healthcare Overview. The pivot has not yet been taken out but this could be a nice trade if the 21.85 trigger is taken out in a pattern nearly 2 years long now. Give it credit for holding the round 20 number well recently, a number that was a brick wall to get through between last December and this April. Keep in mind it does trade on the light side so treat this name as a speculative play. It will be vying for its third consecutive weekly CLOSE above the 20 figure, and all of the last three intraweek traded below it, so would be a good sign if it were to happen.