One of the most oversold sectors as of midweek, health care exchange-traded funds and stocks are increasingly likely to begin attracting short-term buying interest.
The Health Care Select Sector SPDRS ETF (NYSE: XLV), to take an overview of the sector, closed lower for five out of six trading days to finish short-term oversold heading into Wednesday’s session. Trading near breakeven levels on Wednesday, the stock is still likely to open oversold when trading begins Thursday morning.
XLV has a short-term, positive edge of more than 1%, and a “consider buying” rating of 8 out of 10 earned late in the day on Wednesday.
Going deeper into the health care sector, we can identify a number of individual stocks that have pulled back to levels where, historically speaking, traders have been more inlinced to buy than sell in the short-term. Closing lower for three days in a row are both Coventry Health Care (NYSE: CVH) and Community Health Systems (NYSE: CYH). Shares of CVH are pulling back from a test of intermediate-term highs late last week, and have retreated to near, two-week lows in addition to ending trading on Wednesday in technically oversold territory above the 200-day moving average.
CVH earned a one-point upgrade in the first few hours of trading Wednesday morning, moving to a neutral, 7 out of 10, rating, and a positive, short-term edge of more than 1%.
For its part, Community Health Systems has only been trading in bull market territory since the second half of January. But the pullback in the stock is CYH’s second significant move lower in just under a month.
The previous pullback in CYH came at the beginning of March in the form of a five-day correction that took the stock into short-term oversold territory for three days in a row. In less than two weeks, CYH was up nearly 5% and trading at new, 10-day highs.
Ahead of Thursday’s open, shares of Community Health Systems are back in oversold territory after closing lower for three consecutive sessions. Pulling back to new, two-week closing lows, shares of CYH earned a two-point ratings upgrade from a neutral, 6 out of 10, to a “consider buying” 8 out of 10 Wednesday morning, and have a positive edge in the short-term of nearly 1%.
Other health care stocks that short-term traders and active investors may want to keep an eye on include Universal Health Services (NYSE: UHS). Shares of UHS have pulled back for three consecutive trading days, earning a short-term edge of nearly one and a quarter percent.
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David Penn is Editor in Chief of TradingMarkets.com