• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock XLV’s Record Rally: The Must-Know Investment Move of the Year
Stock

XLV’s Record Rally: The Must-Know Investment Move of the Year

by January 12, 2024
by January 12, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

If you ran a StockCharts scan for New All-Time Highs on January 9, one of the exchange-traded funds (ETFs) you would have come across is XLV, the Healthcare Select SPDR Fund. XLV is an index ETF that represents the Healthcare sector.  A defensive gameplay, XLV’s performance over the last few months has been spectacular, with a 16% rise from its October low of 122.04 to last Tuesday’s high of 141.56. 

So, are we seeing a sector rotation gaining enough momentum for longer-term growth? And with attractively lower valuations, new weight-loss drugs coming into the market, and a potential increase in healthcare utilization, is it time to jump in?

A One-Year Snapshot of Sector Performance

CHART 1. SECTOR SUMMARY. Note XLV’s one-year performance, which is relatively tepid.Chart source: StockCharts.com. For educational purposes.

If you head to the StockCharts Sector Summary section and view sector performance over one year, you’ll see that XLV has returned 5.87% over the last 12 months. Compared to Technology, Communications, and Consumer Discretionary—the year’s top performers—Healthcare (XLV) has room to run.

XLV also has a StockCharts Technical Rank (SCTR) score of 89, which is relatively strong. What’s important about this? Well, using six technical indicators, SCTR compares the technical strength of one stock or ETF against all others in its peer group. It does a lot of the technical work for you by comparing its technical strength.

But before looking at XLV’s current price action, let’s add something else. Let’s take a look at its seasonal performance over the last 10 years, relative to itself and the S&P 500 ($SPX). This is to give a better context to its current price action and possibly to determine whether to enter a position now or wait.

XLV’s 10-Year Seasonal Snapshot

Here’s what XLV’s seasonal performance looks like over a 10-year period.

CHART 2. XLV’S 10-YEAR SEASONAL PERFORMANCE. Note the difference between higher closing rates versus market returns.Chart source: StockCharts.com. For educational purposes.

We can see that November is a relatively strong month for XLV. On average, its rate of higher closes stands at 78% (see number on top of the bar), and its average return stands at 3.6%, which is also the highest “average” return on a 10-year basis.

The rate of higher closes and average returns have historically dwindled after November; see the average January return of 0% despite its high rate of higher closes, which stands at 60%. So, according to this chart, July and November are XLV’s strongest months in terms of returns and higher close rates.

Now, let’s compare XLV’s seasonal performance against the S&P 500 ($SPX).

XLV’s 10-Year Seasonal Performance Against the S&P 500

The picture changes quite drastically when looking at XLV’s performance relative to the S&P 500.

CHART 3. XLV SEASONAL PERFORMANCE VS S&P 500. Depending on whether you’re looking to outperform the broader market or diversify your holdings within the broader market, this seasonal chart highlighting relative (seasonal) strength paints a slightly different picture from the one in the earlier chart.Chart source: StockCharts.com. For educational purposes.

When it comes to outperforming the S&P 500, XLV’s strongest month is December (historically outperforming the broader index by 1.1%)  and June (outperforming the S&P by 0.8%). While July may be SLV’s second strongest month when viewed in relation to its performance, the S&P 500 has tended to outperform SLV in the same month.

So, what does XLV look like now? Let’s start with a longer-term view (see weekly chart below).

CHART 4. WEEKLY CHART OF XLV. Note how Volume-by-Price and the 50-period SMA converge near the same range, indicating potential support.Chart source: StockCharts.com. For educational purposes.

While XLV has barely clawed its way to an all-time high, note the significant change in the Chaikin Money Flow (CMF), which averaged net positive over the last four years and is now slightly above the zero line following months in the red. The increase in selling pressure indicates bearishness. However, that’s not necessarily what the price action is telling us.

The 200-period simple moving average (SMA) shows a steady upward trajectory. But look at the 50-period SMA and how prices have fluctuated above and below it in a wide trading range for over two years. If the current breakout fails but retains a fundamentally bullish stance, then look to the 50-period SMA for a potential bounce. This relative range also coincides with the longest Volume-by-Price bar, presenting a strong case for anticipating support.

Let’s take an even closer look by looking at the daily chart (see below).

CHART 5. DAILY CHART OF XLV. Note how the daily chart suggests the same support range as the longer-term weekly chart above.Chart source: StockCharts.com. For educational purposes.

The Relative Strength Index (RSI) confirms the likelihood that XLV may experience some near-term weakness, giving the RSI’s “overbought” reading. The 200-day SMA and Volume-by-Price both converge on the $130 to $131 range for potential support (similar to the weekly chart). The Ichimoku cloud adds another layer of confirmation of potential support within that range.

Below the chart, note XLV’s relative performance against the S&P 500 (remember that earlier seasonal chart). XLV’s recent underperformance suggests that, given the right economic factors, the Healthcare sector could have plenty of room to run.

But when might we expect this, or where would be a good tactical entry point if we can’t entirely predict it?

Using Seasonality to Evaluate an Entry Point

While some investors look to Healthcare stocks to diversify their return sources, others do so in anticipation of a turn in the business cycle. Right now, analyst expectations for 2024 remain mixed.

So, looking at seasonality to provide context to a potential entry point (assuming you’re bullish on XLV), we know that February is a historically poor month for XLV (in terms of higher-close rates and return), both on its own and compared to the S&P 500.

Some investors may find underperforming months the ideal time to buy in anticipation of XLV’s stronger seasonal months, around June through November. If you share this thesis, waiting for XLV’s prices to reach the $130–$131 range may provide the ideal opportunity to open a position for a longer-term trade. You will want to set a price alert for $131 in this case.

View Seasonality Charts For a Wider Context

Some stocks tend to shine brighter in certain months of the year. With StockCharts’ interactive Seasonality Chart tool, you can dive into this aspect of technical analysis. This tool allows you to explore how often any security has gone up during each month of the year. Select a stock and see if there’s a seasonal pattern to its performance. If you’re unfamiliar with this method or tool, check out this tutorial.

How To Set a Technical Price Alert

Setting a technical alert at these support and resistance levels will be helpful as you weigh your potential entry points against any market developments that may influence your decision.

To access the Technical Alert Workbench, follow these steps:

Log in to your account.At the top of any page, click on Your Dashboard.Click the Alerts button or the New button in the Your Alerts panel.Choose which type of alert you want to create from the Alert Type buttons at the top left. To create a price alert, select “Price Alert” as the alert type.Add COST in the symbol box and set your price trigger.Choose how you wish to be notified and then click the Save Alert button.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

You Might Also Like
  • How to Find the Market’s Strongest Stocks in Just Four Clicks!
  • The Ord Oracle February 15, 2023
  • Breadth Divergence Continues
  • MEM TV: Get In EARLY! These Areas Are Seeing LIFT OFF
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Common Lessons Amongst Corporate, Sports & Investment Portfolio Turnarounds!
next post
Your Questions Answered! Moving Averages, Chart Patterns, Inflation & More

You may also like

Is the USD Setting Up for a Perfect Rally?

November 20, 2024

Sector Spotlight: Sector Rotation Out of Defensive into Offensive

July 11, 2023

Walmart Stood Strong When The Market Crumbled – Time To...

February 13, 2024

How to Identify Great Trade Opportunities Using the MACD Zero...

September 8, 2023

Trump’s Policy Shift Reveals Potential Big Winner!

December 28, 2024

Some Classical Technical Developments Shaping Up As Volatile Markets Gets...

January 29, 2023

The Only Setup That You’ll Ever Need

July 13, 2023

Energy-related Commodities Lead, but Oil Looks Vulnerable

September 21, 2023

Two ETFs That Could Thrive Based on a Normal Yield...

December 6, 2024

MEM TV: Don’t Miss These! TOP Sector and Industry PICKS...

December 30, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Can the S&P 500 Move Meaningfully...

    June 28, 2024

    QQQ Breaking Out Again; Watch This...

    November 10, 2023

    Mish’s Daily: Sugar Futures and Social/Economic...

    January 18, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here