By Pongpat Khamchoo, CMT, CAIA

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Chart 1: XLV Poised to Outperform SPX

The Health Care sector (XLV), which has underperformed the S&P 500 (SPX) since 2023, shows signs of a potential turnaround. Both chart patterns and technical indicators point to improving momentum.

From a chart pattern perspective, the XLV/SPX ratio has formed a Double Bottom, signaling that the sector may be shifting from a downtrend to an uptrend after failing to make new lows — an early indication that relative strength is stabilizing.

In addition, the MACD has been showing persistent bullish divergence over the past few months and has now crossed back into positive territory, suggesting that momentum is turning decisively in favor of Health Care.

Looking ahead, the initial upside target is a retest of the 200-day SMA, and a sustained breakout above this level would serve as confirmation of a new uptrend — marking the sector’s transition from laggard to leader.

Chart 2: Positive Crossover in XLV

In addition to analyzing the relative chart, it’s important to also examine the absolute price chart of XLV to ensure that the relative outperformance isn’t simply the result of “falling less” than the broader market.

A key bullish signal has recently emerged: the 20-day SMA has crossed above the 200-day SMA, confirming a positive crossover and reinforcing the reversal signal previously seen in the relative chart.

The last time a similar positive crossover occurred was in late 2023, which led to a strong rally in XLV. Earlier in 2025, the 20-day SMA approached the 200-day SMA but failed to cross above it, meaning no bullish confirmation was triggered at that time.

Charts 3–5:  Stock Opportunities Within the Health Care Sector (LLY, ABBV, and AMGN)

For investors seeking higher returns through individual stock selection, three standout names within the XLV sector are Eli Lilly (LLY), AbbVie (ABBV), and Amgen (AMGN).

LLY shows a positive crossover between its 20-day and 200-day SMAs, similar to XLV itself. As the largest component in the Health Care ETF, LLY recently retested its 200-day SMA and formed a bullish reversal candlestick, indicating a successful retest and potential continuation of the uptrend.

ABBV remains a sector leader, having displayed a positive crossover since mid-July. The stock’s recent pullback to the 20-day SMA was accompanied by a hidden bullish divergence in RSI, suggesting that the decline is likely a healthy correction within an ongoing uptrend.

AMGN is showing strength as well, with both a positive crossover and a breakout from a symmetrical triangle pattern occurring simultaneously — a combination that often signals the start of a new bullish phase.

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