Technical Analysis Signals Impending Reversals For XBI, XPH, XLV

Healthcare ETFs XBI, XPH, and XLV have been strong, but are approaching key Fibonacci retracement levels and their upper Bollinger Bands

Feb 22, 2017 at 8:50 AM
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In case you haven't noticed, we've been dedicating more time in recent weeks to identifying stocks at crucial technical levels -- whether Fibonacci retracements or Bollinger Bands. In the past few days, we also observed a trio of exchange-traded funds (ETFs) in the healthcare sector hovering in crucial areas: the SPDR S&P Biotech ETF (XBI), SPDR S&P Pharmaceuticals ETF (XPH), and Health Care Select Sector SPDR Fund (XLV). Below, we'll take a closer look at XBI, XPH, and XLV shares.

XBI Shares Show Signs of Overheating

XBI has been hot, just off its fourth consecutive weekly advance. Yesterday, in fact, the shares hit an annual high of $69.92, and are just off that level at $69.01. As a result, the ETF finished Tuesday with a 14-day Relative Strength Index (RSI) of 67, and is perched within a chip-shot of its upper Bollinger Band -- pointing to borderline overbought conditions. Meanwhile, the underfoot $67-$69 area corresponds with a 50% retracement of XBI's 2015-16 highs and lows, which previously acted as resistance -- and could once again. In short, the biotech ETF could be on the verge of cooling off after a rapid run higher.

xbi stock chart with fibonacci levels and bollinger bands

XPH Could Resume Downtrend

XPH, by contrast, has been trending consistently lower over the long haul -- down 32% over the past two years to trade at $42.06. The shares have picked up the pace lately, up 8.4% month-to-date. But continued gains are far from guaranteed. For one, in recent sessions, the previously supportive 200-day moving average has seemingly become a speed bump. For another, the 23.6% Fibonacci retracement of XPH's 2015-16 highs and lows is just overhead, and this level proved to be a ceiling for the shares last August and September. Last but not least, the pharmaceutical ETF is just a hair off its upper Bollinger Band, hinting at pullback potential.

xph stock chart with fibonacci bollinger bands 200 day trendline

XLV Approaching Call Wall

After advancing the past three weeks, XLV is now perched at $73.99, above the $72-$73 range that has alternated as support and resistance going back to 2015. However, just overhead is the $75-$76 neighborhood, which rejected the ETF in mid-2016. Resistance could be bolstered this time around by huge peak open interest at the March 76 call, totaling 86,189 contracts. Two other considerations add to the potential for a near-term breather. First, the healthcare shares are closing in on their upper Bollinger Band. Second, XLV's 14-day RSI of 77 sits well into overbought territory.

xlf stock chart with bollinger bands

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