Dead Cat Dancing?

At the CLOSE last Friday, healthcare stood fractionally LOWER YTD, the only major S&P sector to do so (in fact the second “worst” performer in 2019 thus far was the utilities which are higher by 9%). This weeks gain has it back in the green, but the distance between it and the rest of the major sectors is breathtaking. Could the price action in the group, be setting up for a big run higher? I am not a mean reversion player, but in the very least it should snap back somewhat. But something more may be at stake. Below is the chart I posted in our 4/4 Healthcare Report and it is becoming more relevant with the seasonality. The May-July period is by far the strongest behaved, and this nascent bounce could be anticipating that. 

Device Durability:

The device space has been the best actor within the healthcare arena. The IHI chart shows support just where one would have expected. The ETF is lower by just 7% off most recent 52 week highs, half of the 14% descent of the more volatile XBI. Give credit for the nice bounce off the upward sloping 200 day SMA, the last 4 sessions, and last Friday through today all CLOSED up and in the upper half of their daily ranges. It is a good start, but look for a recapture of the WEEKLY double bottom breakout pivot of 219.61 taken out the week ending 2/15. DHR has one of the best charts in the ETF as it never undercut its 50 or 200 day SMA and holding the big gap beautifully from 2/25 when it agreed to buy GE assets. 

Examples:

Finding names in the healthcare space that were not hurt during last week, would be a difficult endeavor. Leaders and laggards were punished alike, but some names held firm and shrugged off the onslaught. Below is the chart of BOLD and how it appeared in our 4/10 Healthcare Report. Round number theory came into play as the 40 number was firm resistance dating back to last August. It recently acted that nothing happened to the healthcare arena, and that should be a good sign going forward. It is now above the bull flag again and a decisive move through 40 could be powerful.

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