Healthcare Ready for Second Half Run?

On whatever metric you look at healthcare as measured by the XLV has been uninspiring. Over the last one, three, six-month or YTD basis the ETF is either the 8th or 9th best major S&P sector out of 11. Was Friday the beginning of something solid with the strong recapture of the 50-day SMA and more importantly the completion of the bullish morning star? Of course, no one knows but it provides at least some decent risk/reward that some follow through to the upside is in store. Healthcare is a very diverse space and looking under the hood, the XBI always seems to let shareholders down. Round number theory has come into play on the MONTHLY chart with a rejection at 100 at the 50 MONTH SMA in February-March (give it credit for remaining north of the break ABOVE the bearish head and shoulders pattern). I think one needs to stay small in this group until that line is taken out, then one can step on the accelerator. The IHI MONTHLY chart feels a bit heavy as we know the best breakouts tend to work right away and the break above the double bottom pivot of 57.78 lasted just one month in March (notice how RSI was above the overbought 70 number between 2014-2022 and has not approached that level since). The IHF MONTHLY chart has traded sideways for three years and the path to least resistance is higher as the trend preceding the digestion was firmly higher. What this all means is that individual stock selection is key to success. Search for names already acting well or names that are displaying healthy bottoming behavior.

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