Relationship Issues:
Within the very diverse healthcare group comparisons to subsectors could give investors good places to over and underweight. The ratio chart below comparing the XBI to the IBB shows a risk-off flavor as the more dynamic “youthful” names underperform their larger cousins for the last 3 months. This speaks to a defensive posture as market participants look for maturity and dividends from individual names. While both of these are in downtrends the IBB is “just” 11% off its most recent 52-week highs while the XBI is 18% off its annual peak. Looking at the daily chart of the XBI notice it is back again to the lower part of a channel and candle patterns have been helpful in identifying smart purchases. A bullish morning star on 12/20, a bullish harami on 1/15, and an engulfing on 2/12 saw quick but temporary advances. Currently, the engulfing candle last Friday was negated and today’s piercing line could see a sprint higher but it would likely be short-lived. The PPH also is touting a conservative approach as it has outshined biotech since the election, the opposite of what many believed would occur, and has acted brilliantly since taking out a bullish inverse head and shoulders formation. The IHI, representing medical equipment, was unable to break above a bull flag we spoke about last week, but a move into the 62 area would be the initial touch of a rising 50-day SMA following a cup base breakout, often a solid entry point.