Healthcare Sector ETF Poised To End Nine-Week Bullish Streak

The top three holdings of the S&P 500 Healthcare Sector ETF (XLV) are showing technical signs that suggest a pullback in the week ahead. But considering the market conditions, buyers are likely to keep any dips in these stocks short-lived.

Johnson & Johnson (JNJ) carries the largest weight in XLV, comprising 10% of the ETF. The stock is approaching notable resistance that comes in at $148.

JNJ
JNJ Weekly Chart

This price point held the stock lower in the first month of 2018 and then once again in the last month of the same year. Considering the upcoming week will be the last one for the year, a bullish break of such a major level does not seem likely. Rather, we may see some profit-taking as investors look to square their books ahead of the year-end.

UNH
UNH Daily Chart

UnitedHealth Group (UNH) on the other hand gapped above its 2018 high in the past week. The technical signal for a potential pullback comes from Friday's bearish candle. The stock opened on a strong note, but sellers quickly stepped in at the psychological $300 price point, driving the stock lower for the rest of the session. Friday's downward momentum, and the bearish engulfing candle, hint at more weakness over the next few sessions.

There are two immediate levels to watch in the week ahead. The first is $288 which marks the previous record high, printed in December 2018. The next level buyers might be watching comes in at $281. This price point marks the highest weekly close last year. 

MRK
MRK Daily Chart

Lastly, Merck & Co (MRK) is showing signs that it could pare recent gains. The stock gapped higher on Friday but failed to extend on the gains. This resulted in a doji candlestick pattern on a daily chart, which signals some exhaustion.

The technical outlook for MRK is an interesting one. This stock recently broke above a horizontal level at $87 that had held it lower for much of the year. For buyers, any type of dip will likely be welcomed, especially if the breakout point is retested.

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