Next year is shaping up to be an interesting one…

There are many sectors gearing up for some big moves. One of them is the healthcare sector.

Healthcare has lagged the broader market rally of this year. While the S&P 500 is up about 19% this year, 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 next year is more rapid sector rotation.

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

XLV’s price chart certainly makes a strong argument for this being the case.

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 completes and XLV breaks out. But when it does, we should see prices travel sharply higher.

You can check out XLV’s price chart below.

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

And 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, that will put a target of around $160 into focus.

That’s plenty of upside to play for.

Just remember – 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 completed.

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

Happy trading,

Imre Gams