The medical devices and scientific instrument and research companies are showing strength this month. Several in the space like Danaher (DHR) and EXACT Sciences (EXAS) look like they are ready to break out.
One way to take advantage of the broad sector strength is to trade the iShares US Medical Devices ETF (IHI). The daily chart of the fund shows it breaking our of a symmetrical triangle-like consolidation. A successful breakout projects a pattern target price that makes new highs.
The RSI indicator is tracking above its center line confirming the positive price momentum, and the Chaikin Oscillator is above its center line reflecting improving buying interest.
The trade offers a good risk-reward ratio at its current position.
The iPath Short-Term Futures ETN (VXX) tracks an index with exposure to futures contracts on the CBOE Volatility Index with average 1-month maturity. It resets daily so traders should use it as a short term and not a long term trading vehicle.
That said, a bullish morningstar reversal pattern has developed on the VXX weekly chart. The pattern formed just above the $26 level which correlates with the 15 level on the Volatility Index (VIX). Monitoring how this pattern plays out on the weekly time frame can provide context to analyzing the daily time frame.
A morningstar, as regular readers know, is a bullish three-day reversal candle formation. It consists of a large range down-day candle, followed by a narrow opening and closing range doji type candle, and completed by a large up-day candle. It suggests a transition in trader sentiment from bearishness, to uncertainty, to bullishness. The morningstar has been rated as a reliable candle pattern.
This morningstar comes after a period of trader complacency but that attitude may be about to change. A corroborating technical development is the bullish crossover in the MacD. It reflects a turn in upside price momentum. Upside volume has also been increasing over the last month.
The VXX needs to continue higher from here to confirm the legitimacy of the morningstar pattern, and any potential reversal in sentiment. But, concern may be replacing complacency.