Don't Ignore This Chart!

Healthcare ETF (XLV) Seeking First Aid

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Healthcare stocks led much of the market's rally off the 2009 lows - especially since early 2011.  That was then.  This is now.  Technical conditions have deteriorated immensely since the Spring of this year when warning signs emerged (see "Healthcare Stocks Are Vulnerable To Weakness Ahead").  Negative divergences on the weekly MACD warned us of potential momentum issues.  Now we're seeing the confirmation in terms of major support breakdowns on the weekly chart and very bearish behavior as resistance was recently tested.  Take a look at the chart:

For the first time since 2011, the 20 week EMA is pointing lower.  Worse yet is the fact that we tested that now-declining 20 week EMA on our last rally attempt and failed.  With the weekly MACD making a bearish crossover of its centerline and a failure at 20 week EMA resistance, it appears to me as if this group is heading lower over the intermediate-term, especially on a relative basis.  Look for that blue relative uptrend line to be tested in the months ahead.  That suggests to me to look elsewhere in terms of long positions in the foreseeable future.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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