5 Health Care Stocks Setting Up to Break Out

BALTIMORE ( Stockpickr) -- It doesn't matter which side of the political aisle you sit on -- one way or the other, the Supreme Court's Obamacare ruling on Thursday has big implications for the country as a whole.

And, no surprise, it's got big implications for a handful of health care stocks. Today, I want to show you five that are breaking out as a reaction to the news.

On Thursday, the Supreme Court ruled 5 to 4 to uphold the individual mandate in President Obama's Affordable Care Act. It's a controversial law, and the Supreme Court's decision is equally controversial, but I'm not here to talk politics. Instead, I'm more interested in the trading opportunities that are coming out of the ruling.

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Hospital operators rallied hard on Thursday from the news, but in most cases, those boosts were too quick to take advantage of. Still, plenty of investors were scouring the healthcare industry for buying opportunities, and all of that demand pouring into the sector is just now creating a handful of technical trading opportunities this week.

For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

Here's a look at five technical health care setups that could deliver breakout gains to your portfolio this week.  

Abbott Labs

Shareholders of Abbott Labs ( ABT) are having a strong year in 2012. So far, shares of the $102 billion pharmaceutical and medical device stock have rallied 15% year-to-date. And thanks to last week's buying pressure, shares could have a lot further to go in the second half of the year.

Abbott had been forming an inverse head-and-shoulders pattern since the start of May, consolidating after making a swift move up from early February lows. The inverse head and shoulders is a pattern that's identified by two swing lows (the shoulders) that occur at around the same price level. They're separated by a deeper swing low (the head). For an inverse head and shoulders, the price level to watch is the neckline, the resistance level that acts as a sort of upside barrier for shares. In Abbott's case, that neckline was at $63.

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On Friday, Abbott gapped up, pushing through its neckline and triggering a buy signal in shares at the open. The volume spike on Friday was a good indication that buyers were participating in the breakout.

While ABT isn't a textbook inverse head and shoulders, it's a solid setup. That said, there are a couple of similar trades out there that are looking less extended now.

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