One of my annual exercises every December is to consider which sectors are underperforming and which are likely to turn things around. This year, the common answer is healthcare, and there’s reason to believe the industry’s recent rally may be paying off. When we look at this sector, we tend to focus on big drug manufacturers and big pharma stocks. We’ve seen the SPDR Healthcare Select Sector ETF (XLV) rally and push the biotech sector to new 52-week highs. However, there is a forgotten aspect of this field that is starting to raise eyebrows among technologists. It’s a medical device (using the iShares U.S. Medical Devices ETF (IHI)). Last week, I joined Frank Holland on Worldwide Exchange to touch on the turnaround that’s happening in the space and share my pick for Idexx Labs (IDXX). IDXX is the fourth largest holding in the IHI ETF (fun fact – it’s also the largest company in Maine) and just hit an all-time high. Stocks look great on multiple time frames. In fact, as my friend and fellow CMT member Katie Stockton wrote in this week’s Monday Pro, the entire sector is looking great on multiple time frames. I wholeheartedly agree. When choosing stocks for Worldwide Exchange, I had other ideas I wanted to share within the sector, but I could only choose one for the TV segment. Another stock I’m watching is Steris (STE), a global leader in sterilization and infection prevention solutions. Observing stock prices over multiple time frames can yield incredible risk-reward setups. First, there’s the long-term one, as seen on the weekly chart for the past five years. Not surprisingly, stock prices peaked at the end of the coronavirus pandemic. They gave back all these profits and have been slowly striving for greater heights ever since. Now there is a clear breakout. The RSI momentum indicator continues to trend upwards and there is no danger of overbought. This means there is room to move higher and momentum is a tailwind. Trading Long-term investors can easily set their risk/reward parameters using a breakout above $250. Several times this level acted as resistance, and after crossing that threshold, the previous resistance often acted as support. We will use the level just under $250 to add a precautionary stop in case we fail to move higher. On the upside, the stock could reach the $300 level in the next two quarters. This equates to an increase of approximately 20% to 25%. In the short term, there is clear overhead resistance at $267.50, so it may take some time to push further. The $250 level has been tested and held once, and we believe it will hold again once tested. Again, a clear risk-reward narrative is forming across both time frames. Given Steris’ relative strength, up 26% year-to-date compared to the Medical Devices sector’s 8.7% rise, leadership is clear and we believe Steris will continue to lead as rotation into the Medical Devices sector continues. Disclosure: (none) All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
