HOMEBUILDING LEADERS ARE DR HORTON, LENNAR, AND PULTEGROUP -- HEALTH CARE INSURERS LED HIGHER BY HUMANA, CIGNA, AND UNITEDHEALTH GROUP -- BIOTECH AND DRUG ETFS MEET RESISTANCE -- HEALTHCARE SPDR TESTS OLD HIGHS -- BAXTER INTL RECOVERS
DR HORTON, LENNAR, AND PULTE LOOK STRONG... Recent messages have shown bullish breakouts in a couple of ETFs tied to housing. The stronger of the two is the U.S. Home Construction iShares (ITB) which is the purest play on homebuilders. That's because its five biggest stocks are homebuilders. Today's message will look at three of those stocks. Chart 1 shows DR Horton (DHI) surging to the highest level since last August. Its relative strength line (top of chart) has also turned up. DHI is the biggest stock in the ITB (12.7%). The second biggest weighting (11%) is Lennar (LEN). Chart 2 shows that stock breaking through last summer's high to achieve a bullish breakout. Its relative strength line has turned up for the first time since last summer. PulteGroup (PHM), which is the fourth biggest holding (8%), appears to be on the verge of a bullish breakout. Chart 3 shows PHM breaking out of a bullish symmetrical triangle extending back four years. New highs by those stocks would put them at the highest level in a decade.
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Chart 1
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Chart 2
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Chart 3
HUMANA, CIGNA, AND UNITEDHEALTH REMAIN STRONG... While selling in biotechs and drugs is weighing on the healthcare care, health insurers are still rising. Chart 5 shows Humana (HUM) nearing previous peaks formed late last year and spring 2015. An upside breakout would put the stock at an all-time high. Chart 4 shows Cigna (CI) trading at the highest level since 2015 after recently completing an upside breakout. The strongest chart belongs to Unitedhealth Group (UNH) which is already trading at a new record (Chart 6). I've suggested in previous messages that healthcare leadership has come from groups like medical equipment and supplies, as well as insurers. That's still the case, although biotechs and drug stocks have been rising of late.
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Chart 4
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Chart 5
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Chart 6
BIOTECH AND DRUG ETFS MEET RESISTANCE... I recently shows the Nasdaq Biotech iShares (IBB) testing overhead resistance formed last September. That test is still going on, and may even be causing some profit-taking. Needless to say, an upside breakout through that important chart barrier would be bullish for biotechs and the healthcare sector. Chart 8 shows the VanEck Vectors Pharmaceutual ETF (PPH) also rallying of late. The PPH, however, is meeting resistance at its 200-day average. That's where most of today's healthcare selling is coming from.
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Chart 7
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Chart 8
HEALTH CARE SPDR TESTS OLD HIGHS... Chart 9 shows the Health Care Sector SPDR (XLV) challenging previous peaks hit in mid-2015 and 2016 while in a short-term term overbought condition (see RSI line on top of chart). The overall pattern, however, looks like a consolidtion within an overall uptrend. In other words, higher prices are likely. While biotechs and drugs are holding the XLV back today, stocks in medical supplies are rising, including the next one. Chart 10 shows Baxter Intl (BAX) reversing higher from morning selling, after recently exceeding its October high to reach a new record. And it's still above that breakout point. That's an encouraging sign for it and the sector.
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Chart 9
