ChartWatchers

A Healthcare Stock Poised to End its Correction

 | 

The Bollinger Band squeeze signals a volatility contraction that can lead to a volatility expansion. But which way? For directional clues, we need to analyze price action and other indicators. Henry Schein caught my eye because the stock has a Bollinger Band squeeze, a bullish chart pattern, an uptrend and a strong sector. That's a potentially powerful combination.

The chart below shows HSIC with the Bollinger Bands in pink and at their narrowest since February. This means volatility contracted and we should prepare for a volatility expansion. In other words, prepare for a move.

As far as directional clues, the long-term trend is up because price is above the 200-day SMA. The sector is also strong as the Healthcare SPDR (XLV) recorded a 52-week high earlier this week. This suggests that the path of least resistance is up.

The price chart also sports a bullish corrective pattern, the falling wedge. The stock advanced from late March to early August and then fell back with the falling wedge the last five weeks. This decline retraced 38-50% of the prior decline and price is holding above the 200-day. The retracement amount and the pattern are typical for corrections within bigger uptrends.

Now what? The immediate trend is down as long as the wedge falls and the PPO remains below its signal line. Watch for a breakout at 68 and an upturn in the PPO to reverse this fall. A breakout would end the correction and signal a continuation of the bigger uptrend.

This week at TrendInvestorPro we unveiled a new chartbook that features long-term and short-term breadth models for the S&P 500, Nasdaq 100, S&P 100, S&P MidCap 400 and S&P SmallCap 600. Combined with the trend indicators, these models can keep investors and traders on the right side of the trend.

Click here to take your analysis to the next level!

--------------------------------------

Choose a Strategy, Develop a Plan and Follow a Process

Arthur Hill, CMT

Chief Technical Strategist, TrendInvestorPro.com

Author, Define the Trend and Trade the Trend


Want to stay up to date with Arthur's latest market insights?

– Follow @ArthurHill on Twitter

– Subscribe to Art's Charts

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. 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
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus