The healthcare sector has been on a solid two-month run of outperformance as investors focus on semiconductors and other technology-related themes. In fact, from the end of June to this week, the Healthcare Select Sector SPDR Fund (XLV) is up more than 6% while the Nasdaq 100 is down about 3% and the S&P 500 is up just under 2%. A quick look at charts of the healthcare sector reveals some fascinating technical setups, including a rare bullish chart pattern for Medtronic (MDT). The daily chart shows what is called an “inverse head and shoulders” pattern, which indicates a long-term consolidation followed by an uptrend. This pattern is characterized by a major low (in this case around $69 in October 2023) and a series of higher lows to the left and right of that major low. The key to any kind of head and shoulders pattern is the neckline that forms by connecting the swing highs between the head and all the shoulders. If we connect the 2023 and 2024 swing highs for MDT, we can see that we get a pretty clear trendline that finally cleared in mid-August. Looking at the weekly chart, we can see why this pattern is driving a big change in sentiment for Medtronic. The stock has been trading in the $70-90 range since 2022 after a significant sell-off that began in September 2021. So, this complex head and shoulders bottoming pattern suggests that the downtrend of 2021 and 2022 is finally coming to an end, and MDT now appears to be entering an accumulation phase of higher highs and lower lows. What’s next for Medtronic? The breakout above trendline resistance was a key trigger for the bull run in this healthcare stock. This week saw MDT rise above its 150-week moving average for the first time since April 2022. If Medtronic can complete a rotation above the Fibonacci resistance of $94.50, we expect it could rise to at least $110. Finding bullish patterns across the stock market at a time when major growth stocks look vulnerable and major benchmarks are stalling in their attempts to reach new all-time highs can make a big difference for investors. -David Keller, CMT Chief Market Strategist, StockCharts.com, President, Sierra Alpha Research LLC, marketmisbehavior.com Disclosure: (None) All opinions expressed by CNBC Pro contributors are solely their own opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliated companies, and may have been previously disseminated by the contributor on television, radio, the Internet or other mediums. The content above is subject to our Terms of Use and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect any individual’s unique circumstances. The content above may not be suitable for your particular situation. You should strongly consider seeking the advice of your own financial or investment advisor before making any financial decisions. Click here for full disclaimer.
Health-care stocks outperforming, one name is flashing rare buy signal
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