Don't Ignore This Chart

This Medical Devices Stock Looks Poised to Play Catchup

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The Health Care SPDR (XLV) is the best performing sector over the last six months with a 21% gain and the Medical Devices ETF (IHI) is one of the top performing industry group ETFs with a 25% gain. There are dozens of healthcare stocks hitting new highs and showing big gains, but there are also a few stragglers that may play catchup.

Hologic (HOLX) is part of the medical devices group and in the "medtech" industry. The stock is up around 11% over the last six months, but lagging the sector and its industry group. This may change because I am seeing some bullish signs on the chart.

First, the stock fell sharply in August with a gap down and high volume. This plunge did not break the stock as it firmed above the spring lows and near the 61.8% retracement. Firming turned into buying pressure as the stock broke above the early September high and filled the gap with good volume. A flag formed after this surge and this is a bullish continuation pattern. A flag breakout would signal a continuation higher.

The indicator window shows volume and the Accumulation Distribution Line (ACDL). There are three big red volume spikes this year as the stock fell on high volume. Volume in between these spikes is more mixed, but there is clearly more buying pressure than selling pressure since April. Notice that the Accumulation Distribution Line moved steadily higher the last six months and hit a new high in mid September. This shows accumulation and this supports the price breakout.


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Senior Technical Analyst, StockCharts.com

Book: Define the Trend and Trade the Trend
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Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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