The SPDR Healthcare Sector fund ETF (XLV) has been the best performing sector ETF in the last month with a 4.65% return. This earnings season has been relatively positive for Healthcare stocks.
Using Trading Central’s technical event screener, I searched for healthcare stocks that are showing bullish technical events inside well established uptrends. I am looking for stocks that have at least 15% upside potential.
Celgene (CELG): Prices have crossed above the 200-day moving average and the MACD (Moving Average Convergence Divergence) has given a bullish signal.
Moving averages are used to smooth out the volatility or “noise” in the price series, to make it easier to discover the underlying trend. A bullish event is generated when the price crosses above the moving average, and in this state, the price is likely in an established uptrend.
The MACD (Moving Average Convergence Divergence) plots the difference between a shorter-term (12-bar) and a longer-term (26-bar) exponential moving average (EMA). Bullish and bearish events are generated respectively as the MACD fluctuates above and below zero to indicate whether prices in the shorter term are stronger or weaker than the longer term average.
A 9-period EMA of the MACD is overlayed as a “signal line” which smooths out the MACD to provide a clearer view of whether it’s moving upward or downward. A bullish event is generated when the MACD crosses above the signal line, showing that the current MACD is actually higher than its average, a sign of increasing strength for the price. An upside breakout above the 200-day moving average paired with a bullish MACD signal indicates strong upside momentum.
Another stock in the healthcare sector that interested me is Bristol-Myers Squibb (BMY): A golden cross has beenconfirmed with the 50-day moving average crossing above the 200-day moving average and a continuation gap higher.
Gaps usually represent important areas of support or resistance. A Gap Up will indicate different situations based on the context in which it was formed. A Gap Up in an uptrend may indicate a previous level of resistance has been broken and now forms a support level. A Gap Up in a downtrend may indicate an end to, or a reversal of, the prior downtrend. Gaps provide an indication of a financial instrument’s SHORT-TERM outlook. In the case for Bristol-Meyers Squibb, a continuation gap was confirmed indicating a strong uptrend is present.
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