Chart Analysis: The S&P Health Care Index closed last week on its highs and looks poised to break out above resistance at 380. This should mean that it will then challenge the 2008 highs at 391.10. Most of the other sectors have already overcome their corresponding resistance levels.
DaVita Inc. (DVA) provides services in dialysis centers and hospitals for those with severe kidney diseases. DVA made a high on December 1 at $74.61 before declining to a low of $68.14 on January 7.
What It Means: Though health care is normally a more “defensive” sector, maybe it is benefiting from the stock market’s relentless rally as investors see too much risk in some of the other sectors that are up sharply over the past month.
How to Profit: I prefer individual stocks as opposed to one of the healthcare ETFs like the Health Care Select Sector Fund (XLV). The strong weekly close in DVA and the good support nearby makes it an attractive stock in a sector that seems to be gaining relative strength. Buy DVA at $70.26-$70.66 with a stop $67.17. First upside target is between $75.30 and $76.30.
Tom Aspray, professional trader and analyst, serves as senior editor for MoneyShow.com. The views expressed here are his own.