Defensive Relative Strength
There are a few high relative
strength stocks setting up in in bases, but with the dominant trend
blowing to the south, intermediate-term traders obviously should minimize long exposure while either waiting in cash or taking the odd short.
If
you’re going to go long, make sure you’re in a strong group. Along with select
retail, some of the healthcare names are showing constructive behavior.
AdvancePCS
(
ADVP |
Quote |
Chart |
News |
PowerRating), formerly known as Advance Paradigm, rose 1 3/4 to 46
9/16 on average volume. On Thursday, the pharmaceutical management company,
Express Scripts
(
ESRX |
Quote |
Chart |
News |
PowerRating) and Merck
(
MRK |
Quote |
Chart |
News |
PowerRating) announced plans to form a
joint venture aimed at lowering drug prescription mistakes that kill about 7,000
Americans every year. The new venture, called RxHub LLC, will electronically
connect physicians to pharmacies, drug benefit managers, health insurers and HMOs.
Lincare
Holdings
(
LNCR |
Quote |
Chart |
News |
PowerRating), one of the country’s biggest providers of respiratory
services to patients in the home, is shaping up as well, though I’d like to see
more volume on the right side.
Cardinal
Health
(
CAH |
Quote |
Chart |
News |
PowerRating) also is showing relative strength. The holding company has a
number of subsidiaries providing pharmaceutical services, medical and surgical
and healthcare information processing.
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
check out the Money
Management area of TradingMarkets’ Stocks Education section.