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Obama Win Exposes Medical Stocks to QE Fatigue


NEW YORK ( TheStreet) -- Medical stocks have held up well so far in the fourth quarter as the Health Care Select Sector SPDR Fund (XLV) traded up to a multi-year high of $41.40 on Oct. 17. Since then XLV has been moving sideways to down and on Wednesday morning opened with a downward gap below its 50-day simple moving average at $40.09.

Assuming that XLV ends the week below its five-week modified moving average at $39.96, the weekly chart profile will be downgraded to negative. Negative technicals are a symptom of what I call "QE fatigue."

At we show the medical sector 6.9% overvalued, and seven of the 10 components of XLV I am profiling here are overvalued by 3.4% to 32.7%, even after Wednesday's market decline.

Back on Aug. 8, I was premature with my story Book Profits on Health Care Stocks . I will update the profiles of the 10 stocks I covered that day including updated "buy and trade" strategies. Keep in mind that some health care stocks could get hurt by Obamacare, while pharmaceutical companies have their own stories of drugs under patent and drugs in the pipeline.

If you are trading the XLV ($39.53) here is the daily chart and my key levels. XLV is below its 21-day and 50-day simple moving averages at $40.50 and $40.09, signals that indicate risk to the 200-day at $37.84. My annual value levels are $36.71 and $34.12 with monthly and quarterly risky levels at $40.86 and $41.16.

Chart Courtesy of Thomson/Reuters

Reading the Table

OV/UN Valued : The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating : A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a Black number increased by that percentage.

Forecast 1-Year Return : Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number are projected to move higher by that percentage over the next 12 months.

Value Level : The price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the timeframe noted.

Risky Level : The price at which to enter a GTC Limit Order to sell on strength.

Abbott Labs (ABT) ($64.52 vs $66.03 on Aug 8) still has a buy rating according to ValuEngine with the stock above its 200-day simple moving average at $62.89. My annual value level is $59.79 with a quarterly pivot at $63.28 and weekly risky level at $68.62.