Stoxx 600 Health Care Index: a delicate but constructive situation

At the end of 2016 (1), I wrote an article about the STOXX Supersector Europe 600 Health Care Index, pointing out that there were technical signs of a possible recovery. I indicated that the Index in July 2016 reached an important high at about 780, and I suggested that this was the level to overcome to have the first confirmation that the healthcare European equity market had regained its strength.

The level has been overcome, and now the index is returned at 741.

If we consider the weekly chart of the Stoxx 600 Health Care Index, we can notice that prices touched the uptrend line three times (a) with a divergence in 2016. From that point we had a new potential rising low (b) and now the oscillator is turning up again.

Looking to the daily chart, we can observe a breakout of the medium term trendline (a), two rising lows (L1 and L2), and two rising highs (H1 and H2). Another positive indication is that now the 200 days moving average has a positive inclination (b). But the oscillator has not yet upcrossed the zero line (c).

A look at the last ten years of relative strength of the index shows us that in July 2016 we had the biggest and deep fall since January 2009, a period where the bear market started to fade away, replaced with a new uptrend began in March 2009. Despite the positive recovery of the last period (from last (a) to (b)), the ratio is trying to upcross the previously downcrossed uptrendline.

In brief, the Relative Strenght Ratio and the oscillator indicate a vulnerable situation. But we could be in a consolidation phase where the most important price level remains the L2 in the second chart at about 710/720.

Mario Valentino GUFFANTI CFTe – SAMT Vice President – Swiss Italian Chapter – mario.guffanti@samt-org.ch

Disclaimer: the above article is for general information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

(1) https://www.marketplus.ch/news/stoxx-600-health-care-index-is-the-worst-over.html