A handful of large capitalization healthcare stocks have weathered the turbulent market very well this year. Overall, the healthcare sector is outperforming the broader market, providing greater potential for relative safety and superior gains. The Health Care SPDR (NYSE:XLV) ETF is up 5.14% year to date, compared to the S&P 500 SPDR (NYSE:SPY), which is still down 2.24%. Therefore, the healthcare sector has been one of the market leaders to the upside, and there are four stocks in the sector that have been performing especially well.

Abbott Labs (NYSE:ABT) is up 13.49% this year to $54.27, from $47.82. The stock has outperformed and continues to show strength. From August until now, the stock has risen steadily and created a higher low in October, while the broader market made a new low. The stock is consolidating under $55 for almost two months after hitting a 52-week high of $55.62 on October 19. A breakout above $55 is a strong signal, with a move above $55.61 confirming the uptrend is continuing. The initial upside target is $58.50 followed by $60. There is resistance at $56.50, so this area should be watched to see how the stock reacts. Primary support is at $52, and a drop below that level indicates at least short-term weakness.

Bristol-Meyers Squibb (NYSE:BMY) is having a good year so far, up 24.83% to $33.18, from $26.58. The stock has been in an uptrend all year, and recently made a new 52-week high at $33.72. The stock is pushing into overbought territory based on the RSI and may see a pullback, which should provide a buying opportunity between the 50-day moving average and $30. $30 is the primary support level, therefore a drop below is a warning signal. The current price level has not been seen since 2002, therefore there is little resistance overhead and $37 to $37.50 is the initial target.

Humana (NYSE:HUM) has been on fire, up 57.06% this year to $86.54 from $55.01. Despite being up so much already, the stock is still exhibiting strength, recently putting in a new 52-week high at $90.76. The stock been ranging over the last week between $87.50 and $85. This is a potential buying opportunity, with a stop below $85, or below $80 for longer-term traders. The November low is at $80.89 - a drop below is a warning signal. If the stock continues to make new highs, the next target is the psychologically important $100. One cause for concern is a diverging RSI indicator, it is not confirming the price moves higher. It does not mean the stock can't go higher (a divergence can last a long time) but it is something to be aware of. (For more, see An Introduction To The RSI.)

Alexion Pharmaceuticals (Nasdaq:ALXN) exploded higher in June and again in August and has not looked back since. It is up 60.11% year to date to $65.11 from $40.67. After a strong run up into October, the price has been moving sideways recently. The breakout of the range which is developing will ultimately tell if this stock still has room to the upside. A rise above $70.50 would break the range to the upside and could take the price to $80. On the other hand, there are two support levels on the downside: $62 and $59.42. If the stock breaks below $62 it is a warning signal, but a break below $59.42 is likely to bring in more aggressive selling. Like Humana, Alexion is also showing a divergence on the RSI. Price can still go higher, but it does indicate that a break to the downside is possible. (For more, see What does it mean to use technical divergence in trading?)

The Bottom Line
The healthcare sector has been doing well this year and certain stocks have provided great returns and are still showing potential. These stocks have been market leaders and are still showing price strength as the uptrends continue. That said, a break below the primary support levels mentioned are warning signals for a further correction. While there is an RSI divergence on two of the stocks, divergence is not a good timing indicator. Therefore, price is the ultimate indicator, and currently these stocks are strong until proven otherwise. (For more, see 3 Slow-And-Steady Healthcare Stocks)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  2. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Growth

    Take a close look at the Vanguard Small-Cap Growth ETF, which focuses on domestic small-cap equities with a fundamental growth strategy.
  3. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
  5. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
  6. Mutual Funds & ETFs

    7 Best ETF Trading Strategies for Beginners

    Exchange-traded funds are ideal instruments for beginning traders and investors. Learn the seven best strategies for trading ETFs.
  7. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  8. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  9. Chart Advisor

    4 Stocks Still Flashing Buy Signals

    In the midst of volatility and a big market sell-off last week, these stocks are flashing buy signals.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  4. Indicator

    Indicators are statistics used to measure current conditions ...
  5. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  2. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!