We've been extremely vocal about the Medical Devices space on the blog, and rightfully so, with the sector continuing its long-term trend of out-performance throughout 2018. The index has 57 components, but because the top 10 stocks make up roughly 60% of the index, opportunities in the smaller components tend to be overlooked by many market participants. In this post I want to look at all of its components and highlight names where our risk is well-defined and the reward/risk is still skewed in our favor.
Let's start off with the sector ETF $IHI on an absolute basis for context. Prices are just off all-time highs after successfully retesting their breakout area near 203.50. As long as prices are above that level, short and intermediate-term momentum remains intact and our next upside objective is up near 248-249.50.
Click on chart to enlarge view.
On a relative basis, the sector continues to digest its strong year-to-date gains and work off a bearish momentum divergence by consolidating above our previous price objective at 0.734. As long as this ratio remains above that level, an upside resolution and continuation of this long-term uptrend is the most likely outcome.
An individual name in the sector breaking out is Masimo Corp. It's been consolidating for the last 18-months and this push to new all-time highs signals the resumption of its long-term uptrend. As long as prices are above 104.80, we want to be long with an upside target of 119.50.
Conmed Corp. is another name making fresh all-time highs after consolidating below our price target 76.10 for the last 6 weeks. As long as prices are above that level, we want to be long and taking profits at 101.25.
Medtronic PLC is breaking out of a 2-year base to new all-time highs. If prices are above 88.50 we want to be long and taking profits at 101.50.
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