As one of the big healthcare suppliers, Baxter (BAX) is in one of the strongest sectors. We usually think of healthcare as a defensive sector, but the growth in Biotech and the aging of the original baby boomers have made the healthcare arena bullish in good times and bad. Within the group, the traditional defensive components have not ebbed as much when the equity market is riding a strong bullish theme. According to the SCTR ranking, Baxter was under performing or average at best and the stock price did spend the last 2.5 years consolidating in a range between $34-40. Looking at the SCTR we can see it has not had an SCTR ranking this strong in the past 2.5 years. The last time Baxter was in the top 20% of price action determined by the SCTR was way back in 2012 shown by the top blue line which reflects the current level. I keep a line at 75 to show when stocks enter the top quartile of price action. In June Baxter started to push up in relative strength shown in purple breaking a long decline of 18 months of under performance under the solid blue down trend line. The dotted line extending into 2012 was also broken. This is very bullish in my mind.
The volume came piling in well just after the first quarter results. In a market where volume has been light everywhere, look at the mountain that has moved into this stock! The fact that a defensive stock such as Baxter is breaking out when I am concerned about the health of the bull market fits into my analysis as a move to stable earnings and a defensive posture.
Greg Schnell, CMT