Healthcare is looking healthy

January 17, 2017 09:00 AM
Cycle Projection Oscillator: Rocket science meets markets

The Cycle Projection Oscillator (CPO) is a technical tool that uses complex algorithms to filter multiple cycles from historical data, combines them and gives a graphical representation of their productive behavior. The CPO methodology employs proprietary statistical techniques to obtain cyclical information from price data. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.

Health Care Select Sector SPDR (XLV) 

The Health Care Select Sector ETF (XLV) set a bottom just prior to last year’s election and the CPO is indicating that bottom may hold for some time. Although XLV has been sliding lower ever since spiking higher after the election, the CPO shows XLV moving higher throughout the first quarter and remaining at elevated levels into the second half of 2017. 

Unitedhealth Group (UNH)

UnitedHealth Group (UNH) is another stock that saw an immediate jump following the November presidential election. The stock rallied more than 10% in the month following the election. The CPO shows that UNH could see a small correction going into yearend that may be a strong buying opportunity. The CPO expects UNH to turn higher once again in Q1, but the best opportunity may be a short after UNH sets a high near the end of Q1. The oscillator shows UNH setting a significant top in March. 

Aetna (AET)

Health insurance giant Aetna (AET) also saw a significant election bump, rising nearly 20% in the month following Nov. 8, but appears to be getting just started. As opposed to UNH, the CPO is showing that Aetna will have a pretty smooth ride higher for the first half of 2017. AET has come off of its Dec. 1 peak, which could provide an opportunity to get long for a strong move higher.

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at johnrawlins@msn.com. @cpopro1. You can reach John at johnrawlins@msn.com.