XLV traded relatively flat last week, sharply underperforming the broader market following strong outperformance initially
off June lows. On an absolute basis, there are no changes. The index faces heavy 200-DMA resistance, with near-term
support remaining at the 50-DMA followed by the $124-$125 range. Though its relative strength line (vs S&P 500) has
fallen, the overall uptrend remains intact, still warranting an equal to overweight sector position. A further lag this week
would warrant a reduction in risk.
Author: Raj Gupta
Raj Gupta is Director, Research Analyst.
After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients.
RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq regained and are consolidating above their 50-
DMAs (S&P 500: 3,918; Nasdaq: 11,497) for the first time since March. Look for near term support at the sharply rising
10-and-21 DMA followed by the 50-DMA. The distribution day count stands at four each.
O’Neil Health Care Weekly
XLV jumped 2.4% Friday, retracing early week losses despite remaining below primary resistance at the 200-DMA
($131.92). Should the index pullback, look for support at the 50-DMA ($128.34), followed by last week’s lows of $125.23.
Health Care continues to display a rising relative strength line versus the broader market, warranting an overweight
position.
Market View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq rallied Friday to partially retrace
early week losses and regain their respective 10- and 21-DMA. Despite the move, both indices remain below primary
resistance at the rolling 50-DMA (S&P 500: 3,937; Nasdaq: 11,535). The distribution day count increased to four and two,
respectively.
O’Neil Health Care Weekly
XLV gained 82 bps, rising for a third straight week, but directly into 200-DMA ($131.97) resistance Friday. We expect the
index to now consolidate a large three-week move around current levels. Look for a pullback to be contained at the 50-
DMA ($128.57), where multiple short-term moving averages are converging. A break and sustained close below this level
could lead to further downside with support between $124-$125. Overall, Health Care continues to show strong relative
strength versus the broader market and therefore warranting an overweight position.
Market View
The U.S. market remains in an Uptrend Under Pressure. Some of the immediate pressure was relieved as the S&P
500 (+1.9%) and Nasdaq (+4.6%) posted solid gains for the week and retook respective 21-DMAs (S&P 500: 3,872;
Nasdaq: 11,392). The 21-DMA will now act as the first level of support for each before recently established lows at the end
of June (S&P 500: 3,839; Nasdaq: 10,850). Indices avoided distribution all week, and the distribution day count stands at
one and two, respectively
O’Neil Health Care Weekly
XLV traded relatively flat last week, holding sharp gains from the week prior and continuing to sharply outperform the broader market. The index was able to hold near-term support at its 21-DMA ($127.28) before rallying just above its 50-DMA ($129) to close the week. Should XLV remain above its 50-DMA, the next level of logical resistance is the 200-DMA ($132). We continue to recommend an overweight position in the sector as its RS line continues to rise.
Market View
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq reversed from their respective 10-WMA early in the week, adding distribution and breaking below the 21-DMA (S&P 500: 3,872; Nasdaq: 11,343). There is no clear support above year-to-date lows (S&P 500: 3,636; Nasdaq:10,565), which, if breached, would result in the market status moving back to Downtrend. The distribution day count stands at one and two, respectively.
O’Neil Health Care Weekly
XLV gained nearly 8% last week, retracing the majority of the last two weeks of losses. The ETF now faces direct
resistance at its 50-DMA ($129.96). Given a very sharp move into resistance, look for consolidation to be contained above
the 21-DMA ($126.40). Overall, Health Care was the second best performing sector last week and is the best performing
over the last four- and eight weeks with an RS line at new highs, warranting an overweight position.
Market View
The U.S. market has been upgraded to a Confirmed Uptrend. The S&P 500 and Nasdaq staged a Day 5 follow-through Friday, jumping over 3% in higher day/day volume. This is now the fifth FTD of the year. Both indices cleared the 10- and 21-DMA, which will now serve as near-term support, while the next level of logical resistance is the sharply rolling 50-DMA (S&P 500: 4,066; Nasdaq: 11,998).
