Now, we dig in to a bit of industry sector analysis to reveal why the healthcare sector is on our radar screen and in play for potential breakout entry soon.
In this article, we’ll show you our top healthcare ETF pick right now, as well as our two best stock picks within the healthcare sector.
Healthcare ETFs and stocks are currently in pullback mode, after having solid runs throughout most of 2016.
Many have been pulling back from their recent highs, which is bullish because it enables solid bases of consolidation to form.
Such bases of consolidation are bullish and often lead to the best breakouts.
So, let’s drill down to the weekly charts of one ETF and two individual stocks that could soon be in play for Wagner Daily buy entry.
Our top ETF pick within the healthcare sector is S&P Biotech ETF ($XBI), which is nearing major support on its weekly chart.
As shown below, $XBI has come into support of its 40-week moving average (similar to 200-day moving average), while also forming a bullish pennant pattern:
A pullback buy entry into $XBI could be made near current levels, with a stop below the 40-week moving average (or prior swing low for a looser stop).
Of course, $XBI is also in play for buy entry on a breakout above the upper channel resistance (above $67 area).
Glaucoma treatment maker Glaukos Corp ($GKOS) currently has one of the strongest stock chart patterns within the healthcare sector.
The stock is currently forming a tight bullish base near its all-time high, which means there is no overhead resistance to contend with.
This is actually what we look for with the majority of buy setups listed in our nightly stock pick newsletter.
With $GKOS trading near its record high, its price is well above its 40-week moving average, as well as its 10-week moving average (similar to 50-day moving average).
We have annotated the bullishness of $GKOS on the weekly chart below:
Note the big volume spikes within the base, indicating strong institutional demand for the stock.
A big spike in volume on the weekly or daily chart is something we always focus on to help us identify the best stock trade setups.
Finally, note that volume dropped off substantially last week.
If it remains light this week, $GKOS may offer a clear buy entry above the current two-week high next week.
Like $GKOS, $AERI is also consolidating at all-time highs and trading in a very tight range above the 10-week moving average.
The breakaway gap up that $AERI formed on September 15, 2016 was a very bullish sign, as it was accompanied by volume that was 15x greater than average!
The weekly chart below does not show the actual gap up, but the wide-ranged bar on monster volume (highlighted in the black rectangle) led to the current basing action:
If $AERI manages to rally above last week’s highs, it should generate significant buying interest and a low-risk buy entry.
Bullish momentum of such a move could swiftly lead to fresh highs.
Again, look for a strong pickup in volume to confirm the breakout action and your breakout buy entry.
Alternatively, you could establish a partial position near current prices (close to the 10-week MA), then add additional shares on a confirmed breakout.
As always, subscribers of The Wagner Daily will be notified in real-time if/when we “officially” buy $XBI, $GKOS, or $AERI.
Have any other healthcare stocks on YOUR radar screen? Drop a comment below and share your thoughts with the world.
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