Healthsouth (HLS) owns and operates rehabilitation hospitals and provides post-acute health care services. The stock price has been undergoing some recuperative technical consolidation of its own after breaking a long-term uptrend line and suffering a sharp fall from its 2015 highs. Shares have been moving laterally for the last four months in a narrow range between the $32 and $36 levels in an effort to recover its 50-day moving average and re-enter its upper Bollinger band.
The weekly chart shows failure of the uptrend line that defined the advance off the 2014 low and the previous technical significance of the $32 level. Moving average convergence is making a bullish crossover on this timeframe, and the stochastic oscillator moved out of an oversold condition and is tracking higher. These indicators reflect positive momentum as the stock price retests consolidation resistance. The Chaikin money flow indicator has broken above a downtrend line that intersects with its 21-period average and centerline and suggests buying interest.
The consolidation can be seen in more detail on the daily chart with the November 2014 low and the low made in January looking like a potential double bottom. Moving average convergence/divergence on this timeframe has been in bullish divergence to price since the beginning of the year and is currently crossing above its centerline, and the relative strength index is above its centerline. Chaikin money flow is advancing toward positive territory, and the money flow index, a volume-weighted measure of relative strength, is above its 21-period average and centerline.
The price and momentum and money flow indicators are syncing up on multiple timeframes, and the assumption is that a break from the consolidation channel will be to the upside. Healthsouth is a long candidate after an upper candle close above $36 with an initial stop under the 50-day moving average.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.