Health Care and Financials dramatically outpaced the other sectors last week as the S&P 500 SPDR (NYSE:SPY) created a new high at $180.83. With only minor pullbacks since mid-October the buyers have been aggressive, indicating this is likely to be another bullish week for stocks. Prior runs to the upside this year have lasted about a month to a month-and-a-half; this run is around the month-and-a-half mark so a bigger correction is likely forthcoming soon though. Probabilities still indicate a bullish week, and therefore, the Healthcare Select Sector SPDR (NYSE:XLV) and the Financials Select Sector SPDR (ARCA:XLF) will likely be among the top performers if that occurs. On the other hand, a downside week will likely see the Consumer Staples Select Sector SPDR (NYSE:XLP) perform relatively well.
Along with stocks to watch in the each sector, here is the technical outlook for Health Care and Financials.
The Healthcare Select Sector SPDR moved up 1.71% last week, outshining all other sectors. This has been the strongest sector over the last year as well, so while it may not be a top performer every week, this is definitely a sector most traders and investors should be watching. The ETF broke above a rising trend channel, and is headed for the next target of $56.36. The average weekly range is $1.20, but with a holiday on Thursday both buying and selling are likely to be somewhat muted. Therefore, it will likely take more than a week for the price to reach the target. A drop back below $54--also not likely this week--signals a move back toward the lower portion of the channel near $52.
Biogen (Nasdaq:BIIB) jumped 13.15% on November 22, and is a stock to watch this week in the Health Care sector. The intra-day range on November 22 was $289.97 to $274.98, so a move beyond either the high or low provides insight into the likely short-term direction of the stock. A drop, especially a close, below $274.98 indicates some profit taking, with minor support at $260 and more significant support at $254 to $253. A rally beyond $290 indicates continued buying pressure--the next target is $297 based on a 161.8 % Fibonacci Expansion level. It is also quite possible that the November 22 high and low will act as resistance and support this week, making the stock range-bound, as participants decide what to do at this level.
Financials Select Sector SPDR broke a triangle pattern which extends back to June. This is a bullish continuation signal, providing a longer-term target of $23, and a short-term target of $22. Support is $21, with additional support at $20.40. With a weekly average range of just over $0.50, and a shortened trading week, it could take a couple weeks to reach the first target. Not likely to occur in the short-term, a drop back the triangle low near $20 signals the uptrend is in danger.
IntercontinentalExchange (NYSE:ICE) took a strong tilt to the upside, climbing $7.44% last week. The next target is $222, and with a weekly average range of $7.87 that could easily be reached or eclipsed this week. $200 to $190 is a strong support and buying region, as this is where short-term and longer-term trendlines intersect respectively. The uptrend is robust currently, and a breach of $190 is likely some weeks or even months off, but a drop below the levels signals the uptrend is slowing and potentially in danger.
The Bottom Line
A shortened trading week due to the Thanksgiving holiday will likely result in a quieter, but bullish, week. While short-term and long-term momentum are currently up, this market has been advancing for a month-and-a-half without a significant pullback. At some point over the next few weeks a larger pullback is highly likely to materialize. Stop losses are recommended to control risk when such an event occurs, yet trading on the long side in strong sectors and stocks is still the most advantageous strategy.