Today's Hot Topics   ▲  |  ▼

Within the health-care sector are some companies with a good mix of technical and fundamental promise. However, some are thinly traded, meaning some caution is necessary…especially around earnings season, writes MoneyShow.com contributor Kate Stalter.

The medical sector is home to some companies that stand out from the pack in the current market.

Traders who track growth names have likely been following the price run-up in Alexion Pharmaceuticals (ALXN), which rallied to an all-time intraday high Friday.

The maker of treatments for rare diseases was upgraded to Conviction Buy at Goldman Sachs, but even without the analysts’ seal of approval, the stock had been on a tear, gaining 77% in 2011, and tacking on another 7.4% in January.

Click to Enlarge

Despite the technical strength, there are some warning signals on Alexion’s chart. It has not consolidated enough to undercut a previous base since 2008, meaning that a correction in the stock, as investors take profits, would not be surprising at this juncture. Even if it continues rallying, it’s currently out of buy range, and would need another pullback to offer a new entry point.

Alexion reports earnings on Thursday before the open, so watch for price action either up or down as a result of that news.

Alexion has grown into a large cap, but there are a number of lesser-known, smaller medical stocks also popping onto my growth screens.

One that I’ve watched for a few months is Anika Therapeutics (ANIK), a biotech that makes bone and cartilage treatments. This is a lower-priced, more speculative stock. It’s currently trading at around $11; it has a market cap of only $136 million and it moves only 41,000 shares per day.

Click to Enlarge

The stock had been climbing out of a steep consolidation since early October. It notched some bullish action between December and last week, when it paused to take a breather along its ten-week average. On Monday, it gapped nearly 9% higher in monster volume.

The company participates in a Cannacord investor conference this week. Such events often spur further price gains, as analysts and fund managers learn of positive company developments.

Another small medical company that’s showing good moving average support is Synergistics USA (SURG), which makes microsurgical gear. This is another very small company, whose stock should also be considered speculative. Synergistics’ market cap is just $173 million, and it moves only 113,000 shares a day.

Click to Enlarge

Like Alexion, this is a stock that’s already notched a strong price run-up, and could be ready for a correction that undercuts prior lows. In recent weeks, it’s been finding support at its ten-week line, and volume has mostly been below average during the pullback, a good sign.

It could offer a potential buy point as it clears resistance above $7.50. But investors should be aware that it’s showing technical signs that a pullback could be near.

Fundamentally, Synergistics has good potential. Wall Street is eyeing profit growth of 35% this year and 29% in 2013. Stocks often retreat even with good income and revenue expectations, so although the technical have held up, there’s still reason to use caution.

Continued…