A Warning From An Index

If you have been
following
the S&P Health Care Index ($HCX),
you probably noticed that the index closed at the top of a channel yesterday.
Some of you might call it a bear flag pattern instead of a channel, but the
point is: We received a possible reversal warning. Although it looks bullish on
its daily chart below, it is usually not so easy to break out above an
uptrending channel. With this information in mind, I decided to look into the
health care issues for potential short selling. 

The chart below is a daily chart of Bristol-Myers Squibb (BMY),
one of the component issues of the S&P Health Care Index. As you can see,
the stock is in a clear downtrend, and its 50-day moving average has been strong
resistance. In fact, the stock challenged the moving average yesterday, but
failed to break out. It appears that the issue is on its way down to test its
support level near 54.

It pays to check the sector indices.

Have a great weekend,

Eddie