February happens to be one of the toughest months of the year for healthcare, via the XLV. During the last few years only the month of October has a lower percentage of ending higher than where it started. “Sell in May and go away” would have left some gains on the table as May and July have been perfect, albeit a small sample size. Of the major S&P sectors, healthcare on a YTD basis is the worst performer of the 11, yet still higher by more than 5%. These seasonality charts are obviously lagging indicators, meaning the data is in the rear view mirror, and make solid stock selection and let the winners run, and be impatient with losers.
The Bollinger Band Squeeze:
A week ago we highlighted the XOP, as an ETF that was showing contracting Bollinger Bands. I predicted a move higher for that energy ETF which so far has proved to be wrong. Keep in mind the Bollinger Bands give no clue as to the impending direction of the potential sizable move, just that some larger than normal volatility can be expected. Below is the chart of the IBB, and it is showing a “squeeze” as well. Perhaps it can be explained as simple as buy strength. The XOP still is a laggard which is 36% off most recent 52 week highs, whereas the IBB trades just 11% off its most recent highs. A bullish inverse head and shoulders has taken shape, and make all your decisions based upon price action in names in the group, or the ETF itself.
I happen to be a big fan of the round number theory. Some round figures are more important than others. Par is a big one. The twenty number, as it rids teenager status happens to be another influential one. The round 90 number is too, especially if it has not been hit before. Below is the chart of EXAS and how it appeared in our 1/24 Healthcare Report. It is now well above the bull flag breakout, and now has formed another one at the 90 number. One can add to their position above 90.25. The best breakouts often offer additional entries on the way UP.