Healthcare stocks have had a good week, gaining 8.7%, but could that run be coming to an end?
S&P Healthcare Index Daily Chart
Perhaps it was fund managers loading up on defensive healthcare stocks at the end of the quarter, but whatever the reason for the run, it looks to be stalling. Yesterday the Healthcare Index (HCX) recouped 100% of its post-attack losses, but today the index looks to be having trouble moving higher. Perhaps the 50- day moving average is responsible or maybe the August 27th downtrend. Throw in the dreaded shooting star candle and a stochastic oscillator touching overbought territory, and HCX looks poised to pullback.
Tenet Healthcare Daily Chart
On of the strongest stocks in the sector is Tenet Healthcare (THC). Yesterday the stock set a new 52-week high, but is having trouble holding onto that today. The stock is indeed oversold and primed to pullback. Where might THC pullback? The 50-day would be a mild pullback, and $52 a medium pullback. Support at $52 has held since July, and would make for nice low risk entry point if the stock pulls back that far. The year and half long up trend should help to support any severe pullbacks. So why not short it in the meantime - strong relative strength.
American Home Products Daily Chart
While Tenet has been in a nice long up trend, American Home Products (AHP) has been stuck in a four-month downtrend. Today the stock made a brief run at cracking that trend line, but was quickly turned back. Now back below the 50-day and 200-day moving averages, the stock is trying to hold onto support at $57.22. AHP looks like its going lower, but might be too far gone to short.
Pharmacia Corporation Daily Chart
Technically a drug stock but still a member of the Healthcare Index, Pharmacia (PHA) has also been stuck in a downtrend. This week's bounce brought the stock back to resistance at $41, but the advance looks to be halting. Even if PHA can manage to climb past $41, the downtrend and 50-dma are waiting to push it down.