Health-care stocks are outperforming and one name is flashing a rare buy signal, according to the charts

Published Thu, Sep 5 20241:33 PM EDTUpdated Thu, Sep 5 20243:21 PM EDT

While investors have been laser focused on semiconductors and other technology-related themes, the health-care sector has managed to log two months of solid outperformance. In fact, from the end of June through this week, with the Nasdaq-100 down about 3% and the S & P 500 up just under 2%, the Health Care Select Sector SPDR Fund (XLV) is up over 6%. A quick review of charts in the health-care sector yields some compelling technical setups, including a rare bullish chart pattern for Medtronic, Inc. (MDT) . The daily chart reveals what's known as an "inverted complex head and shoulders" pattern, which represents a long-term consolidation followed by an upside thrust. This pattern is marked by a major low, in this case the October 2023 low around $69, and then a series of higher lows to the left and right of the major low. The key with any sort of head and shoulders pattern is the neckline, formed by connecting the swing highs between the head and all the shoulders. We can see that by connecting the swing highs in 2023 and 2024 for MDT yields a fairly clear trendline which was finally cleared in mid-August. The weekly chart shows why this pattern represents such a significant change in sentiment for Medtronic. The stock has been trading in the $70-90 range since 2022, following a significant sell-off starting in September 2021. So this complex head and shoulders bottoming pattern illustrates how the downtrend of 2021 and 2022 finally reached its end, and now MDT appears to be entering an accumulation phase of higher highs and higher lows. What's next for Medtronic? The breakout above trendline resistance was a key trigger for the bull case for this health-care name. This week also saw MDT push above its 150-week moving average for the first time since April 2022. If Medtronic can complete the rotation above Fibonacci resistance around $94.50, we'd expect upside potential to at least $110. At a time when leading growth names appear vulnerable, and our major benchmarks have stalled out attempting to achieve new all-time highs, finding bullish patterns across the equity landscape can make all the difference for investors. -David Keller, CMT Chief Market Strategist, StockCharts.com President, Sierra Alpha Research LLC 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.