Next year is shaping up to be an interesting one…

Many sectors are gearing up for big moves. One of them is the healthcare sector.

Healthcare has lagged in the broader market rally of this year. While the S&P 500 is up about 19%, The SPDR Health Care Select Sector ETF (XLV) is down around 4%.

As investors piled into higher-growth opportunities like tech, healthcare has fallen behind.

But that could be about to change. One of the major themes on my radar for next year is more rapid sector rotation.

That means traditionally defensive sectors like healthcare should have their moment in the spotlight soon.

And XLV’s price chart certainly makes a strong argument for this.

Take a look:

XLV has been trading in a larger sideways pattern since April 2022. At the time, it was difficult to know how far the ETF would drop. But over the last few months, the nature of this pattern has become clearer.

It now looks as though XLV is completing a triangle pattern. It might take a bit longer before the triangle is complete and XLV breaks out. But when it does, we’re likely to see prices travel sharply higher.

Prices are still trading within the boundary lines of the triangle (blue lines). And as long as prices stay within those trendlines, we shouldn’t expect too much directional movement.

However, if prices break hard below the supporting line of the pattern, it’s time to go back to the drawing board.

But things will get really exciting if prices can break through the resistance line of the triangle. If that happens, we’ll see a target of around $160. That’s plenty of upside to play for.

Just remember that it’s important to wait for the breakout to happen before taking any action. Too often, traders will jump into a market before the technical pattern has actually been completed.

Being too early is just as dangerous as being too late.

Happy trading,

Imre Gams

How do you feel about more rapid sector rotations in 2024?

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com.