After recording the best performance of any of the major 11 S&P sectors in 2018, it has become the worst performer in 2019, although still higher by more than 3%. The company it is keeping is conservative as it lingers near the staples and utilities. Below is the ratio chart comparing the XLV to the S&P 500, and its weakness is glaring given the decent comeback by top component JNJ from its December debacle. Not helping at all is the action in UNH, the funds third largest holding, now off 18% from most recent 52 week highs. The name is quickly approaching a double bottom at the 232 level that really needs to hold. As always investors should demand best in breed, and keep a close eye for names showing good relative strength during this move lower.
Like any sector healthcare is diverse. One sub sector that keeps moving higher is the equipment names. The IHI now trades 4% off most recent 52 week highs, compared with the XLV which is 7% off its recent peak. It is showing excellent firmness compared to the S&P 500. This week however it has lost ground everyday with a bearish engulfing candle on Monday forecasting the move lower. It is easily on pace for its worst week of 2019, and once can take slight solace that it is approaching a recent double bottom breakout above a 219.61 taken out on 2/12. Normally however, one would like to see an orderly pullback into a retest in both PRICE and volume. It has been anything but, with both behaving erratically.
There are no ways to avoid losses. They are inevitable and one must acknowledge quickly when one is wrong, as the saying goes “it is ok to be wrong, but not ok to stay wrong”. Below could be a good example of the chart of NVTA and how it was profiled in our 2/26 Healthcare Plan. I am a big fan of the candlesticks and round numbers, but PRICE action itself is omnipotent. Looking back over the trade one could have come away impressed with the action POST breakout from a cup base pivot of 18.48 on 2/20. This week it is showing good relative strength in a weak group UP fractionally, especially following the prior 4 weeks have ripped higher by 45%.