It is hard to get excited about a sector that although higher YTD by 7.7%, is still the worst actor among the major S&P groups. That being said it trades just 4% off most recent 52 week highs, and can be looked upon in a somewhat decent light. The XLV resides above both its 50 and 200 day SMAs, and volume is subsiding during the month of July, although that could simply be a sign of the summer doldrums. It is approaching bearish engulfing weeks made late last year during the weeks ending 10/5 and 12/7, and many are probably positioned for a rejection there once again, so a potential break above could be powerful. It would be wise to stay small within the space, until a breakout above those intraweek highs occurs. As always there will be selective opportunities to take advantage of, but start slowly and add to on strength.
Biotech Malaise Endures:
The biotechs have been a group suffering in 2019. If it was not for a four penny gain last week, the XBI would be on a 4 week losing streak. More importantly, on a slightly longer term basis the last 3 weeks all CLOSED very taut within just .21 of each other. Keep in mind this type of activity usually leads to outsized moves, typically in the direction which it came into. The XBI is lower by 15% from its most recent 52 week highs, so expect another leg down. The ratio chart below shows a bullish falling wedge pattern for the biotechs against the S&P 500, but remember PRICE action should be your ultimate arbiter. And until this chart resolves to the upside, if it does, maintain an underweight in the space.
The healthcare provider group has recorded some nice action recently as the IHF has rallied nearly 7 handles since filling in a gap on 7/24 from the 7/10 session. Below is the chart of ADUS and how it appeared in our 7/10 Healthcare Report. The weeks ending between 7/5-19, all CLOSED very taut within just .49 of each other. This type of coiling action, especially near all time highs, often results in big corresponding moves. Last week rose more than 5%, CLOSING above a 77.92 cup base pivot. Expect higher prices going forward, but it could be a bumpy road as the name is somewhat illiquid, trading an average of 100,000 shares daily.