Book Profits on Medical Stocks

NEW YORK ( TheStreet) -- The medical sector has become one of the six pure momentum sectors in the market today. At we show the medical sector 15.7% overvalued vs. 5.5% overvalued when I wrote Book Profits on Health Care Stocks on Aug. 8. My ETF benchmark for this is the Health Care Select Sector SPDR Fund ( XLV). Below, I profile this ETF and give updates on the top 10 holdings of this ETF.

Medical stocks are more volatile than most of the other momentum sectors as each stock has a story with regard to their drugs, medical services, devices or presence in biotechnology.

When you rely on my three-pronged approach of fundamental screening, technical screening with chart patterns and applying value levels at which to buy and risky levels at which to sell, you are using guidelines to judge what stock specific news is factored-in, or not factored in, during the day to day volatility in the stock market.

Chart Courtesy of Thomson/Reuters

The weekly chart above shows that XLV remains in a positive but overbought pattern with XLV above its five-week modified moving average at $39.08 with an overbought momentum (12x3x3 weekly slow stochastic) reading. Note that when the rally ends the risk is to the 200-week simple moving average at $31.52.

The daily chart below shows an overbought momentum (12x3x3 daily slow stochastic) reading. XLV ($40.07) is above its 21-day, 50-day and 200-day simple moving averages at $39.17, $38.69 and $36.87. XLV set an all-time high at $40.21 on Wednesday. My annual value levels are $36.71 and $34.12 with monthly and quarterly risky levels at $40.27 and $40.84.

Chart Courtesy of Thomson/Reuters

The above table shows data from covering 10 components of the Health Care Select Sector SPDR.

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

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