Today our own Jim Cramer discusses, in a two-part piece, how stocks that do well in a declining rate environment have come roaring back and the crash of oil will only accelerate the move. Read Part 1 of "Stocks That Do Well in a Declining Rate Environment Are Back" here and Part 2 here.
Some of the beneficiaries Cramer talks about, the "most loved of the archetypes being bought," are those "that feast on our health care system."
Let's examine the charts of four of the names he mentions.
While the broad market averages have had some big up-and-down swings this year, the price of Anthem Inc. (ANTM) has been pretty steady the past four months. Can we count on just a steady market now or should we be prepared for strength or weakness in the weeks ahead? Let's check.
In this daily bar chart of ANTM, below, we can see that the stock price of ANTM has been mostly trading between $220 to $240, with $230 seeing most of the action. Prices have crossed above and below the 50-day moving average line several times. The 200-day moving average line has a positive slope and intersects just below the market around $219 or so. The daily On-Balance-Volume (OBV) line has also been stuck in a sideways pattern since February and suggests a balance between bulls and bears. The trend-following Moving Average Convergence Divergence (MACD) oscillator is just slightly above the zero line and recently curved lower. A test of the 200-day moving average line would probably move the MACD oscillator to break the zero line.
In this weekly bar chart of ANTM, below, we have a mixed picture. Prices area above the rising 40-week moving average line. The weekly OBV line peaked in January and has been slowly working lower signaling that sellers of ANTM have been more aggressive. The weekly MACD oscillator has been in a bearish mode since early February as it crossed to a take profits sell signal.
Bottom line: ANTM could get dragged lower with a general market decline but it could also resist those forces. I would give the bears the upper hand in the next few weeks and a close below $218 will be a clear sell signal. If the bulls come in the upside is probably $262.
Humana, Inc. (HUM) is another healthcare name to check out this morning. In this daily bar chart of HUM, below, we can see a jagged advance the past 12 months. Sharp rallies are getting partially retraced until recently. In early May HUM retraced all of its April rally filling a gap. Prices rebounded the past two weeks but have not broken out to new highs.
Let's look closer. HUM is above the rising 50-day simple moving average line and above the rising 200-day line. The volume of trading looks like it has diminished the past two months and the daily OBV line has stalled and failed to move higher. The MACD oscillator recently turned up from the zero line for a fresh outright go long signal but it could get reversed if prices turned lower.
In this weekly chart of HUM, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has been rising for the past three years and is a very bullish clue to the future prices of HUM. The MACD oscillator has been above the zero line since November 2016 and is in a bullish mode.
Bottom line: HUM could break out on the upside and rally to the $330 area next but closes below $270 and especially $260 could bring out the bears and a $244 price target.
Tenet Healthcare Corp. (THC) has been in a strong rally since December with prices nearly climbing three-fold in just six months (chart below). Corrections along the way have been short and shallow for the most part. This kind of price action tells me that buyers of THC are aggressive and do not wait for a deep correction before entering.
Prices are comfortably above the rising 50-day moving average line the rising 200-day line. There is a bullish golden cross of the 50-day and 200-day lines in February, which is not far from the base pattern. The daily On-Balance-Volume (OBV) line has been moving up since October and has made a new high recently to confirm the price advance. The daily MACD oscillator just crossed to the downside for a take profits sell signal.
In this weekly bar chart of THC, below, we can see how prices bottomed in the $15-$10 area and turned higher this year. THC is above the rising 40-week moving average line. The weekly OBV line is very strong and suggests that buyers of THC have been very aggressive. The weekly MACD oscillator is in a very strong position above the zero line.
Bottom line: THC is extended on the upside but that doesn't mean much in that the OBV lines have been very strong and suggest further gains lie ahead. A period of sideways consolidation is possible before new highs are seen.
UnitedHealth Group Inc. (UNH) is another name in this space and further gains are possible. In this daily bar chart of UNH, below, we can see that prices area above the rising 50-day moving average line as well as the rising 200-day line. the daily OBV line has been moving sideways since late January, which is probably not uncommon with consolidation patterns.
Action Alerts PLUS holding UNH has been in a sideways pattern or consolidation pattern since late January. Prices tried the downside in February and in late March. The upside has not been tested all that much and could be the path of least resistance. The MACD oscillator on this time frame could give us a take profits sell signal but overall it has spent much of the last twelve months above the zero line.
In this weekly bar chart of UNH, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line has had a positive slope for the past three years and tells us that there has been some significant accumulation these years. The weekly MACD oscillator just turned up from above the zero line for a fresh outright go long signal.
Bottom line: UNH might have one more shallow pullback over the next few weeks if the current broad market selloff persists into June but I would look for new highs above $250 to be made before too long.