Pharma stocks have quietly outperformed. Here’s one way to play the space

Published Tue, Feb 20 202412:31 PM ESTUpdated Tue, Feb 20 202412:42 PM EST

Pharmaceutical stocks have exhibited positive relative strength in recent weeks after significant underperformance in the fourth quarter of last year. The space tends to be known for its defensive qualities, but it has been on offense lately. Upside leadership has come from heavyweight Eli Lilly , which is up an impressive 31.4% year to date. Recent outperformance from pharmaceutical stocks has resulted in a confirmed breakout in the iShares U.S. Pharmaceuticals ETF (IHE) relative to the S & P 500 , lifting the ratio above its 200-day moving average. The relative breakout marks a trend shift that suggests pharmaceutical stocks may be a source of more lasting outperformance. Looking at the IHE chart, a major breakout resolved a two-year trading range higher in a bullish long-term catalyst. Long-term momentum has shifted positive per a recent monthly MACD "buy" signal, shown on the chart. The breakout generates a long-term measured move projection of $252, which seems too aggressive to be relevant this year but is still bullish. Intermediate-term momentum is strongly positive behind IHE, and while it may consolidate a bit with the broader market, its breakout should foster upside follow-through in the coming months. For stop-loss placement, initial support for IHE is now at former resistance, near $200, and secondary support can be gauged by the rising 50-day moving average ($190). — Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. 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