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Similarity in healthcare sectors

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Back in January, Eric Utley and I began alerting bullish traders to some bullish technicals in the HMO Index (HMO.X) near the 450 level. Today this index is challenging all-time highs at the 500 level. Something is going on in this sector and it now looks to be spilling over into the broader Healthcare Index (RXH.X) right now!

Here's something that may be interesting on the technical side of things. Let's take a quick look at the HMO.X where success by bulls has been found. Then lets try and use that going forward.

HMO Index Chart (HMO.X) - Daily Interval

I do believe that the HMO.X will eventually bolster further strength and get through the upper end of this retracement. Then we'll roll up our retracement. For now, we'll turn our attention to the broader healthcare sector and the RXH.X.

Healthcare Index Chart (RXH.X) - Daily Interval

Very similar technicals are starting to show up in the RXH.X and this has me looking for bullish stocks in the group. One stock that looks like a very good bullish candidate are shares of Biomet (NASDAQ:BMET) $32.05 +2.88%. I wouldn't chase the stock, but do like 1/2 position here in the July $30 calls (BIQGF). With option expiration this week, premiums are going to be higher for options, if we can begin putting together some bullish candidates with good relative strength and some good technical action points then all the better. Lots of work to be done to get ready, but technicals are looking quite bullish.

Jeff Bailey
Senior Market Technician
Option Investor

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