One of the things I like to watch for is sector rotation as the bull market extends. With the new break outs this week of the Dow Jones Industrial to 27000 and the $SPX to 3000, it is an excellent time to see what else is percolating to the top. The healthcare sector is starting to resume its uptrend after a big pullback earlier in the spring. A push through 95 suggestions a break above year-long resistance.
But some names are starting to jump to the top. One example is a stock in a big downtrend that started to make new 52-week highs. McKesson Pharma has been building a solid resistance level around $136. One of the reasons this particular chart intrigues me is pharmaceutical names started to pop on the back of a break in pressure from political forces.
One of the next names on the new 52-week high list is the medical supplies company Baxter (BAX). Baxter has been consolidating after a three-year uptrend. This consolidation has recently pushed to new highs. However, the stock has a few short-term hurdles. One, it has not been in the top stock ranking (SCTR) above 75 for most of the chart. Until we see investors meaningfully push into the stock and make it a compelling performer, this stock may not have enough momentum. Momentum is needed and the PPO is a momentum indicator. If the PPO can finally push above this red-line ceiling, it would mark a behavior change in the stock. This appears to be a stock ready to run, but only if it can gain enough momentum to make it happen. With a backdrop of a positive breakout in healthcare, this might be the turning point for the stock.
Medical equipment maker Medtronic has been in a five-year uptrend. While the stock has not been moving rapidly, it has been a steady grower with a double over 5 years. I do like this breakout with the accelerating momentum on the PPO. As long as the price holds above $75, the stock looks like a nice entry on the breakout.
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