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5 Health Care Stocks Setting Up to Break Out

Stocks in this article: ABT PFE BKD AGN MDT


One of those is Pfizer (PFE), the big pharma giant that's behind blockbuster drugs like Celebrex and Viagra. Like Abbott, Pfizer is forming an inverse head and shoulders pattern. Unlike ABT, Pfizer's setup is less far along, giving investors an opportunity to get in earlier.

It's worth noting that patterns like Pfizer's inverse head-and-shoulders setup don't work because of mystical forces or the shape of the setup; at the end of the day, it just comes down the buyers and sellers, supply and demand. For Pfizer, we know that there has historically been a glut of sellers at an above the $23 level (the neckline), so a breakout above $23 sends an important message: It tells us that increasingly eager buyers have absorbed all of the supply of shares that previously were offered at that level.

>>5 Dividend Stocks Ready to Boost Payouts

That's part of why the inverse head and shoulders is commonly described as a pattern that depicts exhaustion among sellers.

Declining volume for Pfizer is actually a good sign for shares -- it means that participation in PFE has been declining as the pattern progressed and PFE consolidated. A volume spike on a break above $23 (like the one in ABT) is a good sign that the move is valid. Wait for that to happen before buying shares.

Pfizer, one of Lee Ainslie's Maverick Capital holdings, shows up on a recent list of 5 Buy-Rated Stocks Outyielding the 10-Year.

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