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Health Care Sector Gets Capital Inflows. 2 Outperforming Health Care Sectors.

The health care stock market sector is back in shape. The XLV ETF representing the health care sector was up 0.14 percent for the day and 2.2 percent for the week. We wrote yesterday that the biotech and health care stock market sector is showing signs of life.

According to market researcher Factset the health care sector was the second largest aggregate purchase at the sector in Q4 of 2016. Earlier in 2016 the health care sector represented the largest aggregate sale with Pharmaceuticals, Biotechnology, and Life Sciences leading the outflows. Now here it becomes interesting.

“This trend continued in Q4 as hedge funds sold off $1.3 billion worth of stock in the group. However, the selloff in this group was outweighed by the $4.4 billion that was added to companies in the Health Care Equipment & Services industry group.”

In other words the health care sector was heavily sold during 2016 but some specific sectors within health care got a strong bid in the last months of 2016. That is a sign of a trend change. Uncoincidentally, that trend change is now visible on the charts. In particular, two health care sectors are outperforming the rest of the sector.

2 outperforming sectors within health care

Both the Health Care Equipment ETF (symbol XHE) and U.S. Medical Devices iShares ETF (symbol IHI) are hitting a new record highs this week.

U.S. medical devices closed at 147.9 points, an all-time high. Interestingly, as the health care sector tried to recover last year, the medical devices sector was already trading at all-time highs. This week, its previous record was taken out.

Now that is true leadership, and the challenge of investors is to find those outperforming sectors.

Within medical devices we discussed ABIOMED a while back. As the stock sold off in October of last year InvestingHaven’s research team analyzed the root cause, and concluded that ABIOMED was a buying opportunity rather than a sell. That appeared to be a correct call, as long term support held. The stock is now rallying quite strongly, and it is trading 4 percent below its 4-month high.

ABIOMED represents 1 percent of IHI holdings.

A second outperforming sector within health care is health care equipment represented by XHE ETF. Its chart pattern (below) is similar to IHI (above). Note how trading volume (read: buying interest) has followed prices higher.

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