In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Value investors often seek those areas of the market that are stable, have recurring sources of income and do not generally trade at grossly overvalued premiums. The healthcare providers sector fits the bill for these traders, and based on the chart below you can see that this strategy has been paying off for quite some time.

For those new to investing, one of the most popular products used by retail investors interested in increasing exposure to the aforementioned sector is the iShares Dow Jones U.S. Healthcare Providers ETF (IHF). Notice how the 50-day and 200-day moving averages along with the ascending trendline have acted as guides for the stock over the past several years. Active traders will continue to hold a bullish outlook on this sector until the price closes below the 200-day moving average ($109.82). (For more, see: Investing in the Healthcare Sector.)

IHF's Fundamentals

For those who have never dived into the fundamentals of the iShares Dow Jones U.S. Healthcare Providers ETF, you’ll be interested to know that the fund has total net assets of just over $700 million and is comprised of 47 different components. Cost-conscious traders tend to appreciate the fund’s reasonable expense ratio of 0.45%. Those who are interested in creating a watchlist of potential investment candidates may want to analyze the top holdings, which you can see in the table below:

Company

Weighting (%)

UnitedHealth  Group Inc. (UNH)

15.02

Express Scripts Holdings Co. (ESRX)

9.96

Anthem Inc. (ANTM)

7.35

Aetna Inc. (AET)

6.63

Cigna Corp. (CI)

6.22

Source: ishares.com

UnitedHealth Group Breaks Out

As the top holding of the IHF fund, most traders will naturally be drawn to UnitedHealth Group. Taking a look at the chart below, you can see that the bulls have recently sent the price above another key level of resistance. Notice how the uptrend was slowly moving along until the price broke above the resistance of $88.39 back in November. Since the first breakout the upward momentum has increased as evident by the trend’s sharper incline. The most recent breakout will likely result in increased attention and the increase in volume suggest that the uptrend is nowhere close to being over yet. Furthermore, active traders will use the bullish signal triggered by the MACD indicator (black circle) as confirmation of the breakout. Most traders will likely protect their position by placing a stop-loss order below the new-found support near $114.32.

The Bottom Line

Value investors generally look long and hard for investment candidates that provide reasonable valuations along with strong underlying fundamentals. There are few groups of stocks that are better suited for this type of investing than the healthcare providers. Based on the charts above, extremely strong uptrends combined with short-term breakouts are creating opportunities for all types of traders. Risk/reward setups for all are clearly identified by the trendlines and most will expect the sector’s long-term uptrend to continue until the prices close below the noted 200-day moving averages. (For more, see: Healthcare Stocks on the Move.)