There are many SPDR ETF’s out in the market that track numerous sectors. The XLV is the health care sector ETF. It’s comprised of companies like GILD, UNH, AMGN, BMY and 40 others. JNJ and PFE are its two biggest with an index weighting of over 18%.
However, as I gaze over the weekly chart on XLV I notice something very interesting. Over the course of a 6 month time frame, XLV has made a distinct lower low. The last time this occurred was back in 2008. This is also the first time since then that the XLV has closed significantly under the 100 SMA on the weekly chart (which is the blue line).
My personal prognosis looks rather bleak at this point. With an intriguing lower high, an increase in volume, a break below the $66.35 support and a close below the 100 SMA on a weekly chart, at this point I am bearish on the XLV. In the flash crash back in August 2015, XLV spiked down to the $57 level. That’s where the 200 SMA is on a weekly chart. That also happens to be my 2016 target for this ETF. Other sector ETF’s have confirmed bearish, like the XLE. XLF is on life support and the XLU is still showing relative strength at the moment.
The play? Well, depending on your trading experience, traders have copious numbers of strategies at their disposal. I am going to give XLV a few weeks potentially to retest the 100 SMA and the $67 price point. Then I plan on shorting with a mixture of puts, bear put spreads, bear call spreads and possibly some short shares. I do not think XLV breaks the $74 price, at least not this year. I plan on that area being my stop.
This ETF is certainly one I am keeping my eyes on. If you own shares in a larger health care/pharmaceutical company, you too might consider putting this gem on your watch list.
Let’s see what happens! The important thing from here is simply create our plans and follow them!