STAPLES SPDR HITS NEW RECORD -- STAPLE LEADERS INCLUDE COSTCO, SARA LEE, AND TYSON -- HEALTHCARE LEADERS INCLUDE MEDTRONIC AND QUEST DIAGNOSTICS -- PFIZER CONTINUES TO SHOW NEW LEADERSHIP -- ABBOTT LABS NEARS RECORD
CONSUMER STAPLES SPDR HITS RECORD HIGH ... Despite the renewed optimism arising from yesterday's strong market rally, defensive stocks are still showing relative strength and strong chart action. The best performers are consumer staples. Chart 1 shows the Consumer Staples Sector SPDR (XLP) trading at a new record high. It's the only sector to accomplish that bullish action. Big Pharma stocks are also breaking through resistance today. Chart 2 shows Pharm Holders (PPH) trading over 70 for the first time since July. That's giving a boost to the healthcare sector. Chart 3 shows the Healthcare SPDR (XLV) trading over its 200-day average and nearing a test of its October high. That's a good combination of absolute and relative strength. Let's take a look at some individual stock leaders in those leading groups.
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Chart 1
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Chart 2
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Chart 3
STAPLE LEADERS ... The Sector Market Carpets are an excellent place to find individual stock leaders in leading sectors. If you click on the Consumer Staples box today, you'll see the two top percentage gainers to be Costco and Tyson Food. By clicking on those two names, you'll see their charts. It just so happens that both stocks are achieving bullish breakouts today. When looking for stock leaders, I always look for two things. One is percentage leadership. The other is strong chart action. These two stocks have both. Chart 4 shows Costco (COS) breaking out to a new record high today. Chart 5 shows Tyson Foods (TSN) breaking out of a bullish "ascending triangle" that's formed since the spring of 2010. [An ascending triangle is identified by a rising support line below the formation and a flat resistance line along the top. It's usually a bullish formation]. By looking back over the percentage staple gainers for the last week, I found Sara Lee (SLE) . Chart 6 shows that stock trading at a new four-month high. All three staple leaders show a bullish combination of absolute and relative strenth. And they're all in the market's strongest sector.
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Chart 4
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Chart 5
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Chart 6
HEALTHCARE LEADERS ... One of today's healthcare leaders is Metronic (MDT) which is up more than 2%. Chart 7 shows the stock moving back above its 200-day moving average. Its relative strength line (below chart) is rising as well. One of the healthcare leaders over the last month has been Quest Diagnostics (DGX). Chart 8 shows the stock trading near a new four-month high after bouncing off its 200-day average. Its relative strength line is rising as well. There again, both healthcare leaders show a bullish combination of relative strength and strong chart action.
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Chart 7
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Chart 8
PFIZER LEADS BIG PHARMA HIGHER... One of the headlines in my November 7 message was "Pfizer Shows New Healthcare Leadership". That's still the case today. What Pfizer does is very important because it's the second biggest stock in the Healthcare SPDR and Pharm Holders. The daily bars in Chart 9 show Pfizer (PFE) trading near a new five-month high. Its relative strength line has been rising since August. The monthly bars shown in Chart 10 were also shown back in November, but bear repeating today. They show that Pfizer broke a long-term down trendline earlier this year, and then bounced off it (see arrow). That a sign of a stock that's emerging from a long-term downtrend and just starting to show new upside leadership. Another thing Pfizer has in its favor is the fact that it's one of the cheapest big Pharma stocks. By contrast, the strongest stock in that space over the last decade has been Abbott Labs. The weekly bars in Chart 11 show Abbott Labs (ABT) testing the upper end of a bullish "ascending triangle". A decisive close over 55 would make ABT the first big Pharma stock to reach a new record.
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Chart 9
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Chart 10
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Chart 11
PHARM HOLDERS LOOKING STRONGER... Chart 2 shows Pharm Holders (PPH) hitting a new four-month high today. That's only a small part of the story. The monthly bars in Chart 12 show an emerging uptrend in this under-valued group. First of all, Pharm Holders (PPH) broke a long-term down trendline last year (and stayed above it). It has also risen above its 2007 peak (green line) and appears ready to challenge its high from earlier this year. Its relative strength line (below chart) turned up during 2008 and is rising again. If you like big Pharma, but aren't interested in picking individual stock winners, the PPH is a good way to buy the whole group.
