Tickers in this Article: GSK, ABT, BIIB, COV
Recent volatility and a pullback off the recent 52-week high in the S&P 500 has made traders and investors question the trend. Such questioning often results in money flowing into utilities, which was the case over the last week. Healthcare was also quite strong, manging to the be one of the top performers during May 8's session, over the last week and the last month. If the market rallies from current levels, these four healthcare stocks are likely to do well. On other hand if the market declines, these stocks may potentially hold up better than some of the other sectors that have on average been weak over the last several days (such as Basic Materials, Financials and Technology). Also, since healthcare has been doing well, these stocks can provide a gauge for the market. If these four strong healthcare stocks break through support, it is a major warning signal that the market overall is heading lower. Therefore, whether these stocks go down or up, they provide valuable market information.

SEE:The Anatomy Of Trading Breakouts

GlaxoSmithKline (NYSE:GSK) is within a long-term uptrend going back to 2009, taking the form of a rising wedge. As of May 8's close, the stock has pulled back from the 52-week high of $47.48, but remains in close proximity to it. On a short-term and long-term basis, the trend remains higher with the main support area to watch being $44. From January through February of 2012, $44 was a significant support level. If that level is penetrated, it is a major signal for further declines. Pullbacks that hold above this area and then begin to push higher present potential buying opportunities. A rise above $47.48 indicates a target of $49.

Abbott Laboratories (NYSE:ABT) is also in a long-term trend and has been moving aggressively higher since February. The stock remains close to the 52-week high at $63.20 and managed to finish in positive territory Tuesday as the broader indexes declined. Therefore, the stock is showing relative strength. Minor support comes in at $61.55 although major support is not until $59. If $59 is broken, it would be the first lower swing low since August, 2011 and warning of potential further declines. If the stock breaks through the 52-week high the initial target is $65.

SEE: Interpreting Support And Resistance Zones

Biogen Idec (Nasdaq:BIIB) has been accelerating to the upside since mid-2010 and remains in close proximity to the recent 52-week high at $135.84. Minor support is at $129.92 and if breached could lead to a test of primary support at $124. A continued decline below $124 is a significant move as the next major support level is not till $115. At this point the stock continues to march higher though and a move above the 52-week high points to an initial target of $141.50.

Covidien Ltd. (NYSE:COV) made a big jump in late January and since then has been moving within a trend channel higher. The channel is at a relatively shallow angle; therefore, an upside breakout of the channel indicates an acceleration of the trend while a break below the channel is quite bearish given the lack of immediate support below. Channel support is at the May 8 low of $53.60 and if breached could drop the stock to $50.80 which is very close to the March 6 low at $50.75. There is minor interim support on the way at $52.19. Currently the channel is holding, though, and as long as it does, the trend remains higher. The target for upside moves is the upper band of the trend channel, between $57 and $57.60.

SEE: Support & Resistance Basics

The Bottom Line
These healthcare stocks continue to do well, even in the face of the recent market pullback. If the market rallies, expect these stocks to continue to perform well. In the event of a market decline these stocks should be watched closely as they can provide valuable information; if the stocks hold support they can provide a sort of "safe-haven," yet if they break through support, it is a warning signal that the overall market is likely to see a larger decline. This is because once the strongest stocks in one of the strongest sectors give way to selling pressure, there is very little left to hold the averages up.

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.

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