Today the Diamond Scan resulted in three different funds that cover the Healthcare Sector. I have great indicators on XLV, so I'll do my analysis on that one. The other two symbols that came up were FHLC and VHT. This sector has really been a winner since last October with the exception of the end of year pullback. Ultimately it has remained above its 20-EMA since then. It has a very healthy 95.08 Silver Cross Index reading and %Stocks above their 20/50-EMAs is also very healthy (no pun intended).
The weekly chart is very bullish as the weekly PMO rises nicely. The weekly PMO could be considered somewhat overbought given that this reading is the highest we've seen in years. The top of the range previously appears around +6, so there is room for it to continue to rise. I decided to pick out four stocks from the Healthcare sector that found their way into my Diamond scan results today.
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Welcome to DecisionPoint Daily Diamonds, wherein I highlight five "diamonds in the rough." These are selected from the results of my DecisionPoint scans, which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
Bausch Health Cos Inc (BHC) - Earnings: N/A
This one looks like a good intermediate- to long-term investment which is why it is currently on my watch list. The PMO did flatten a little bit today on the pullback. As most of you know, that's when I usually like to pick up my stocks, on a pullback. We've already gotten a sizable pullback today and still price remains comfortably above the 20/50-EMAs. The OBV continues to improve. We will want to see a new OBV high when we get a breakout, that will confirm that price is following volume. The SCTR has been mostly in the hot zone since November.
This is why I'm looking at this one for the longer term. Notice we have a very long-term basing pattern. When I looked at it more closely, I note that price is breaking out of this pattern.
Here is a better view. Price has remained above the base since December. The PMO has plenty of room to ride higher. I think this could be a very interesting play in the intermediate term.
CIGNA Corp (CI) - Earnings: 2/6/2020
Full disclosure, I do own CI. It came up again on the Diamond scan and I still like it. I've marked 1/7 with a vertical line; that was when I wrote about it in that day's Diamonds Report. The price at that time closed at $207.93. I've got a profit going, but I wasn't pleased with that pullback that happened a few days later. I still like CIGNA and with the Healthcare sector on a roll, I suspect it will continue higher. Indicators are confirming the rise.
The double-bottom I annotated from January 7th tells us to expect a minimum upside target near the 2018 tops. The weekly PMO continues to rise nicely and is not overbought.
ICON PLC (ICLR) - Earnings: 2/20/2020
This one is a little on the overbought side given the location and reading of the PMO. I still like the breakout and the rising trend is intact. I like that we saw a breakout and then an immediate pullback that maintained above support at the December top. The OBV is confirming the breakout with a new high.
While the PMO on ICLR is overbought on the daily chart, it is not on the weekly chart. I like to see a bearish pattern, in this case a rising wedge, resolve to the upside. I find that especially bullish.
Johnson & Johnson (JN) - Earnings: 1/23/2020
Another stock with an overbought PMO. I'll allow it. I see great confirmation on the OBV for this breakout and the SCTR has just about entered the "hot zone" above 75. This rally could use a pullback or pause as it has been nearly vertical since the low earlier in the month. Earnings are Thursday, so you may want to wait on this just in case. Earnings can cause price shocks and they aren't always in the 'up' direction. I suspect they will breakout, but maybe that will be an opportunity for JNJ to come back to earth before moving higher.
As we should expect, we see an upside breakout from a symmetrical triangle. These formations are continuation patterns. The weekly PMO looks great and certainly suggests more upside for JNJ.
Current Market Outlook:
Market Environment: It is important to consider the odds for success. The Silver Cross Index measures the percentage of stocks on IT Trend Model BUY signals (20-EMA > 50-EMA), while the Golden Cross Index measures the percentage of stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). Don't forget that as a "Diamonds" member, you have access to our GCI/SCI curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page. Here are the current percentages on the Silver and Golden Cross Indexes:
- Diamond Scan Results: 9
- Diamond Dog Scan Results: 9
- Diamond Bull/Bear Ratio: 1.0
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Full Disclosure: I own CIGNA (CI) and am contemplating adding BHC as an intermediate- to long-term investment should this move take BHC out of the basing pattern in a more decisive manner. I'm currently 35% in cash but will be looking for more investment opportunities depending on next week's action. It seems we should see a pullback very soon and that would be the best time to add positions.
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Technical Analysis is a windsock, not a crystal ball.
NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "diamonds in the rough."
Helpful DecisionPoint Links:
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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