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Tom Aspray, professional trader and analyst was originally trained as a biochemist but began using his computer expertise to analyze the financial markets in the early 1980s. Mr. Aspray has written widely on technical analysis and has given over 60 presentations around the world. Many of the... More
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  • 3 Stocks From A Double-Digit Gaining Sector 0 comments
    Sep 10, 2013 5:55 AM | about stocks: SPY, LH, XLV, HNT, WBMD

    The sharp 3.3% gain in the Shanghai Composite overnight has not yet translated to gains in Europe, where most of the major averages are a bit lower in early trading. The US market closed mixed on Friday, but higher for the week.

    The technical outlook did improve last week, especially on the Nasdaq 100 and Russell 2000, suggesting that the worst of the selling may be over. Clearly, the action over the next few weeks is likely to be choppy with the focus on the September 18 FOMC meeting.

    One of my favorite sectors since 2012 has been health care, as the Select Sector SPDR Health Care (XLV) has been one of the leaders in this double digit year, as it is up almost 27% so far this year. This compares with a 17.73% YTD for the Spyder Trust (SPY). It was one of last week's leaders, also up 2%, with SPY up just over 1.4%.

    XLV looks as though it is ready to resume its uptrend and these three stocks, in this market leading sector, look attractive for new buying.

    chart
    Click to Enlarge

    Chart Analysis: The Select Sector SPDR Health Care (XLV) dropped to a low of $48.82 at the end of August, which was a decline of 5.2%, from the high at $51.50.

    • The 127.2% Fibonacci retracement target is at $52.30, with the weekly starc+ band at $52.55.
    • The relative performance tested its WMA in the middle of August and broke through its downtrend, line b, in the middle of August.
    • The RS line has long-term support at the uptrend, line b.
    • The OBV made convincing new highs with prices in August and only had a minor pullback.
    • The OBV is well above its WMA and support at line c.
    • The daily OBV (not shown) is also positive.
    • The monthly pivot of XLV is at $49.85 with further support at $49.20.
    • The monthly projected low and quarterly pivot are both in the $48 area.

    Laboratory Corp. of America (LH) is an $8.85 billion medical laboratory company that hit a high of $101.69 in June and then made its correction low of $95.36 in July. This was a drop of 6.2% from the highs.

    • The low two weeks ago was $95.50 and it closed last week above the prior two week highs.
    • The weekly relative performance moved back above its WMA as it appears to have completed its bottom formation, line h.
    • A move in the RS line above the downtrend, line g, will confirm that it is again a market leader.
    • The weekly OBV broke through resistance in June, line i, and has now turned up from its WMA.
    • The OBV has stronger support at line j.
    • There is initial support now at 97.61 and the quarterly pivot with further at $96-$96.49.


    Click to Enlarge

    Health Net, Inc. (HNT) is a $2.57 billion dollar provider of managed health care plans that had a high in July of $33.70. The stock closed up 7.6% last week.

    • The monthly projected resistance is at $34.88, with resistance from 2012 at $36.90, and then at $41.22.
    • The relative performance shows a pattern of higher lows, line c, with key resistance at line b.
    • The daily RS analysis appears to have already completed its bottom.
    • The weekly OBV made new rally highs in July, as it has been acting stronger than prices.
    • The OBV closed above its WMA and it held well above support at line d.
    • There is initial support now at $31-$31.50 with the 20-day EMA at $30.86.
    • The quarterly pivot is at $30.71.

    WebMD Health Corp. (WBMD) is $1.64 billion company that provides healthcare information to consumers as well as healthcare professionals. The stock put in a strong performance last week on expanding volume.

    • The 50% Fibonacci retracement resistance is at $35.84, which is calculated from the 2011 high at $58.55.
    • The 61.8% resistance level is at $41.20.
    • The relative performance broke its downtrend, line f, in May.
    • The RS line has been in a steady uptrend for most of the year, line g.
    • The weekly OBV overcame resistance, line h, in June.
    • The OBV has not turned up from its WMA.
    • There is minor support in the $32 area with further at $30.74 to $30.

    What it Means: The technical action for the health care sector is positive from both a monthly and weekly perspective. The action last week suggests that the correction in the Select Sector SPDR Health Care (XLV) is over.

    All of these three health care stocks look positive based on the weekly and daily technical indicators. There may not be enough of a setback in Health Net, Inc. (HNT) and WebMD Health Corp. (WBMD) and have to adjust the buy zones and stops later.

    How to Profit: For Laboratory Corp. of America (LH), go 50% long at $97.88 or better, and 50% at $96.74, with a stop at $94.83 (risk of approx. 2.6%).

    For Health Net, Inc. (HNT), go 50% long at $31.48 or better, and 50% at $30.88, with a stop at $29.48 (risk of approx. 5.4%).

    For WebMD Health Corp. (WBMD), go 50% long at $32.18 or better, and 50% at $31.32, with a stop at $30.33 (risk of approx. 4.4%).

    Portfolio Update: Should be long the Select Sector SPDR Health Care (XLV) at $38.50, with a stop at $47.74.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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