The sector spiked hard and got ahead of itself. Technically the sector becomes very hot, overbought, and too stretched. It has pulled back significantly and has been in consolidation mode. It has been range-bound since the pullback.
The inflow of money and interest has reduced which is normal in consolidation mode. Because of the big spike, the BBs had expanded and are now getting narrower again. Once they become narrower further and pinch then they will break out and the direction is unknown at this stage.
The trend is still upward. There is little degradation the 20 sma has dropped below 50-day sma . This ETF is now trading below the 50 days for a few days it needs to pop above from time to time. RSI is around 42 confirming that the sector is no longer overbought and cooled off and getting close to oversold status. Fast Stochastic an aggressive indicator and is showing signs of oversold. Once the sector get more oversold it will attract traders and investors. The question is now oversold the sector needs to be before its pops.
Instead of looking at the Healthcare sector, I think that this ETF is a better representation of the sector. The leading stocks in the sector have a similar chart pattern and so does OGI. Few other stocks are in a different situation.
This sector is tracking Nasdaq. But when the Nasdaq runs up the run-up in the sector is smaller but on the pullback, during the Nas pullback, the pullback in the sector is bigger or somewhat similar.
The sector needs to get its momentum and inflow of money back. It can be triggered by a big run in Nasdaq, news about the legalization, or improved financial results of some leading stocks.
While the sector is no longer as stretched. No one knows how long it will take to consolidate and rebound strongly to hit the new highs again. There is always a chance that it can also drift lower further and provide reloading opportunities and make the sector attractive again.
One should be prepared for all possible scenarios in short term. Some stocks in the sector have come down to reasonable levels but not all. Some are still trading ahead of the fundamentals and one needs to be careful. One should always look at the fundamentals even while chasing the momentum.
