Filed Under:
Tickers in this Article: VOLC, SIRO , MEND, OFIX
It's interesting that just as the monumental health bill devised by the current administration has been coming to fruition, several medical appliance stocks have been breaking out to new highs. Whether this is coincidental or is occurring as a result of some projected increase in revenue for these companies is anyone's guess at this point. In reality, this could simply be a byproduct of the recent market strength, but the bottom line is that these stocks have been showing good relative strength despite a disparity in the niche markets they are targeting.

IN PICTURES: 7 Tools Of The Trade

Volcano Corporation (Nasdaq:VOLC), for instance, designs, develops, manufactures and commercializes a suite of intravascular ultrasound (IVUS) and functional measurement (FM) products used in the diagnosis and treatment of vascular and structural heart disease. This stock has been showing great strength ever since it broke out of a period of consolidation in December. It rallied sharply into January and settled into a small consolidation that lasted into March. It then broke out on good volume rallying over 20%. It is now trading in a bull flag pattern and could provide a great trading opportunity on a move above $24.50. If VOLC should suffer through a correction, the recent breakout area near $21 would be a logical place for it to find support. (For more, see The Anatomy Of Trading Breakouts.)


Orthofix International N.V. (Nasdaq:OFIX) operates in a different niche market and is another medical appliance stock that is showing strength. OFIX designs, develops, manufactures, markets and distributes medical equipment, principally for orthopedic applications. OFIX had been consolidating in a broadening wedge pattern for several months before breaking out in February. It has been consolidating above the breakout area and could be close to resuming the uptrend. A move above $36 could lead to much higher prices.


Sirona Dental Systems, Inc. (Nasdaq:SIRO), along with its subsidiaries, manufactures and sells dental equipment for dentists worldwide. This is another good example of a medical appliance and equipment stock that is performing well in a niche market. SIRO has been rising steadily higher for several months, only briefly pausing to consolidate for a few months. It cleared this small consolidation in February and has been trading in a very tight range recently. It has been holding just under $38; a move above this level could trigger a breakout.


Following the theme of niche players in the medical appliance sector is Micrus Endovascular Corporation (Nasdaq:MEND) which develops, manufactures and markets implantable and disposable medical devices to treat cerebral vascular diseases. It has been an outstanding performer over the past few months. MEND cleared a base in early December, and rallied from just under $14 a share to over $22 at its peak. It has been in a tight consolidation over the past month and is holding well above its prior base. MEND is close to clearing a trendline that has been marking the recent attempts to clear the consolidation and could be close to testing a breakout. The $22 level would be the area to watch as a signal for a potential breakout.


Each of these stocks serves a niche market, but is also part of a larger group centered on medical appliances and equipment. While there is no true way to know the catalyst for the recent performance, the beauty of technical analysis is that it can reveal these buying patterns across a group and give insight to traders on where money is flowing. Each of these stocks is offering clear levels to watch and some may provide good trading opportunities in the near future. Whether this is due to the healthcare bill or recent market strength is largely irrelevant as long as a trader follows the price action.

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

The author does not hold a position in any of the companies mentioned above at the time of this writing.

comments powered by Disqus
Trading Center