Healthcare shares are under pressure lately, but one stock is separating from the pack

Investors are generally avoiding the health care sector, and for good reason. While the Health Care Select Sector SPDR Fund (XLV) outperformed the S & P 500 and Nasdaq 100 through the end of April, May has meant disaster for pharmaceutical companies following the White House executive order on lowering drug prices. With the S & P 500 and Nasdaq 100 now trading back above their 200-day moving averages, and stocks like Eli Lilly & Co (LLY) and Johnson & Johnson (JNJ) feeling the pain of regulatory pressure, it's reasonable to expect very few opportunities in this former high-flying sector. However, a quick scan for stocks in the health care sector making new three-month highs yielded a number of promising charts showing improved technical characteristics. Separating from the pack? Let's review one of those names, HCA Healthcare (HCA) , and see how improved price momentum could lead to further gains. The daily chart of HCA shows how long it took for this health care provider to eclipse its 200-day moving average. After the first test in Q1, there were three additional failed attempts to push above this long-term trend barometer. Finally, at the end of April, HCA pushed above the 200-day and has now moved up to retest the price gap from October 2024. Note how the Relative Strength Index (RSI) stalled out around 60 during earlier attempts to push above the 200-day moving average. When HCA finally pushed above the 200-day, the RSI moved above the 60 level, showing positive momentum characteristics more common in bullish trends than bearish phases. The weekly chart suggests that this recent upside breakout was the result of a larger cyclical rotation from the pullback in late 2024 to a renewed uptrend phase: The weekly PPO, shown in the bottom panel, gave a buy signal in late February as HCA was nearing its 150-week moving average. We can see a similar pattern with the PPO indicator and moving average support in Q4 2024 and Q3 2022. In each instance, a pullback to the 150-week moving average was soon followed by a PPO buy signal to signal an "all clear" and a resumption of the primary uptrend. How can we manage risk as HCA retests the price gap from late 2024? Using the Ichimoku cloud model, we can see a dramatic break above cloud resistance in March, followed by a test of cloud support at the April low: There could be further pullbacks along the way, but as long as HCA remains above this cloud support zone, the primary trend appears bullish. - David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.

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