Conclusion, Investment Implications, Strategy

SPDR S&P Health Care Equipment ETF (XHE) is resuming its May 2020 Strategic advance amid coincident relative outperformance versus the S&P 500 (SPY), this following 4 months of sideways indecision.  A sustained rise above the 126.37 area would confirm this and target an additional 13% rise to $144.50 per share.  This is an Asbury Momentum trade idea.

Analysis and Rationale

The SPDR S&P Health Care Equipment ETF (XHE) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the health care equipment and supplies segment of a U.S. total market composite index. In seeking to track the performance of the S&P Health Care Equipment Select Industry Index (the “index”), the fund employs a sampling strategy. It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index represents the health care equipment segment of the S&P Total Market Index (“S&P TMI”).

The green highlights in the upper panel of Chart 1 below show that XHE is breaking out higher from 4 months of sideways investor indecision.  This suggests that the May 2020 major uptrend, as defined by its 200-day moving average, is resuming.  A sustained rise above the upper boundary of the investor indecision area at 126.37 would confirm this and target an additional 13% rise to 144.50.

Chart 1

The green highlights in the lower panel show that the blue daily relative performance line between XHE and the SPDR S&P 500 ETF (SPY) moved back above its 62-day moving average on Jun 14th, indicating a new quarterly (our Strategic time frame) of relative outperformance. XHE has already outperformed SPY by 7% since Jun 2nd.

Table 1 below shows that considering the aforementioned upside target and a protective stop placed below the $124.33 area, a long entry price of $128.30 would provide a 1:4.1 risk/reward ratio (risking $1.00 to make $4.10) with an initial risk of 3.1%.

Table 2

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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.