Providing Opportunity In Healthcare

From the desk of Tom Bruni @BruniCharting

Tuesday's Mystery Chart had a lot of people talking and guessing (incorrectly, as usual), so thank you all for your feedback and participation.

Overall the feedback was the chart was a longer-term buy, but people had concerns about how far it's run in the near-term.

With that as our backdrop, let's get into it.

Here's the US Healthcare Providers (IHF) which is emerging from a consolidation via a sharp rally as momentum gets overbought.

Overall this looks like the start of the subsector's next major move to the upside, but we'll get more information about its sustainability from seeing how prices digest their more than 20% gains since early October. Bulls want to see that correction occur through time, rather than price, with IHF preferably staying above its July highs near 180.

Click on chart to enlarge view.

Healthcare Providers, which had previously lagged along with Biotech, have gained traction over the last several weeks and have driven the move in the broader Healthcare sector ETF (XLV) to new all-time highs. Rotation within the sector continues to support higher prices.

Here's United Healthcare, which is the largest holding in IHF at 25%, rallying sharply after sellers failed to hold it below support near 230. After a 30% rally over the last eight weeks this is not a chart we want to be buying today, but from a structural perspective, it's very clear where the path of least resistance lies.

And if United Healthcare is doing well then it's tough to be too bearish Healthcare Providers as a subsector.

With that being said, there are four names in the space that we think are well-positioned to take advantage of continued strength.