Art's Charts

This Healthcare Stock Looks Poised to Play Catch Up with a Big Breakout


Chartists looking for winning stocks should start with leading sectors and industry groups. Having a sector or industry tailwind can greatly improve the odds for a winning trade or investment. Programming note: There is a special announcement at the end of this commentary.

Looking at the sector charts and sector performance, the Healthcare SPDR (XLV) stands above the rest. First, the ETF hit a new 52-week high in late November and price is well above the rising 200-day. Second, XLV is by far the biggest gainer here in the fourth quarter with an 10.67% gain. Healthcare is in a strong uptrend and showing relative strength.

With the Healthcare sector providing a nice tailwind, I decided to scroll through the component charts looking for bullish setups and breakouts. It was not long before I came across  Eli Lilly (LLY). On the chart below, the stock sports a classic two steps forward, one step backward and breakout sequence. Notice how the stock advanced 75% (two steps forward) and then retraced 50% with a falling wedge (one step backward). LLY broke wedge resistance and the 40-week SMA over the last three weeks.

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Arthur Hill, CMT

Chief Technical Strategist,

Author, Define the Trend and Trade the Trend

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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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