In our last Advisor Perspectives article (Rally Hats Are On And We Are Watching Biotech Stocks For A Breakout – 07/11/22) we discussed the possibility of a market rally and suggested our favorite way to trade it was Biotech, likely IBB (iShares® NASDAQ Biotech ETF). That has rallied but is still below the first resistance of 130. We continue to like the trading, and we recently moved to an Overweight on Healthcare in our FRED Report Sector Review. As we all know, Biotech is a subgroup of Healthcare and recent analysis suggests the rest of the Sector is also performing well. We look at two main Healthcare ETFs: XLV (SPDR® Select Sector Healthcare ETF) and RYH (Invesco® Equal Weight Healthcare Index). We show daily charts of these, below with our favorite indicators: stochastics and moving averages.
Of these two, our favorite is actually XLV, the cap weighted ETF. We got this a little while ago, but now it is at resistance around 130 or so with support at 125. It could be making an inverse Head and Shoulders pattern.
RYH is at 280 resistance and 290 is the next resistance if initial level is breached. This pattern is just a bit weaker than XLV. Both of these are strong intermediate-term charts – stronger than most sectors. We show weekly relative strength charts below. This is a more conservative idea than IBB but should work well in portfolios.
We continue to see the possibility for some more upside in August, but the market is at first resistance here in the 398-area on SPY. We are advising our trading-oriented FRED Report clients to be “less exuberant” on buys here. Don’t chase stuff, rather let it come to you on a pullback. Investors, we maintain our plan, started at the end of April, to dollar cost average new money into models (also discussed in our Advisor Perspective article Dollar Cost Averaging In A Bear Market – 06/17/22).
