Recent price action across the health care services and equipment sub-sectors active traders looking for ways to take advantage of a long-term move higher. More precisely, the strong rebound since the March lows has sent the price above an influential level of resistance, which in turn triggered the crossover of long term moving averages. In this article, we’ll take a look in more detail at several graphics from all of these niches in the market and try to determine how the traders are setting up their positions on the days and weeks to come.
SPDR S&P Health Care Services ETF (XHS)
Active traders looking to gain exposure to niche market segments such as health care services often look to exchange traded products like the SPDR S&P Health Care Services ETF (XHS). Taking a look at the chart below, you can see that the recent break above the 200-day moving average and subsequent retest has probably attracted the attention of the bulls. Based on the principles of technical analysis, the success of bounce off of $67 confirms that the bulls are in control of the amount of movement.
Traders will also want to note that the recent rise in the interest of the buyers has triggered a bullish crossover between the 50-day and 200-day moving averages, which is a popular long-term buy signal and often used to mark the beginning of a long-term bullish. From a risk management perspective, traders will be more likely to look to buy close to current levels as possible, and to protect against a sudden change in sentiment by placing stop-loss orders below $67 in an attempt to optimize the risk/reward of the current position.
SPDR S&P Health care Equipment ETF (and find out)
Another segment of niche market that could capture the attention of active traders in the weeks ahead includes the companies that create the underlying equipment used to supply the health care sector every day. As you can see on the chart of the SPDR S&P Health care Equipment ETF (and find out), the price has recently broken above the resistance of its 200-day moving average and after a brief period of consolidation has begun to make another move higher.
Traders may wish to note the crossover between the long-term moving averages (represented by the blue circle) and the intersection between the moving average convergence divergence (MACD) indicator and its signal line, for these popular of purchase of the signs will certainly be confirmation that the bulls are in control of the amount of movement. Based on the diagram, there are few levels of resistance that will prevent a further upward movement, and many traders will likely remain bullish until the price falls below $82.78.
The Silk Road Medical, Inc. (SILK)
Active traders looking for specific companies to add to their portfolio may be well-served to analyze the hop farms of Etfs such as those mentioned above. In the case of the and find out of the ETF, one of the top 10 holdings, which could capture the attention of the followers of the technical analysis is the route of the Silk Road Medical, Inc. (SILK).
As you can see on the chart below, the dashed line, the trend line indicated a short-term ascending triangle pattern near the support of the 200-day moving average. Traders will likely use the recent escape (represented by the blue circle) in combination with the rising trend of cross-breeding between the long-term moving averages as a sign that the price of the shares could be poised for a move higher. From a risk management perspective, stop-loss orders will probably be placed below $38.35 to protect against a surprise of the sale or change in underlying fundamentals.
The Bottom Line
The Segments of the health care sector such as pharmaceutical products have captured most of the attention of investors in recent months. However, based on the chart patterns discussed above, it seems that it might be prudent to take a closer look at sub-sectors, such as health care services and equipment, because they could just be in the early stages of a long-term bullish.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.