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Chartists looking for winning stocks should start with leading sectors and industry groups. Having a sector or industry tailwind can greatly improve the odds for a winning trade or investment.
Looking at the sector charts and sector performance, the Healthcare SPDR (XLV) stands above the rest. First, the ETF hit a new 52-week high in late November and price is well above the rising 200-day. Second, XLV is by far the biggest gainer here in the fourth quarter with an 10.67% gain. Healthcare is in a strong uptrend and showing relative strength.
With the Healthcare sector providing a nice tailwind, I decided to scroll through the component charts looking for bullish setups and breakouts. It was not long before I came across Eli Lilly (LLY). On the chart below, the stock sports a classic two steps forward, one step backward and breakout sequence. Notice how the stock advanced 75% (two steps forward) and then retraced 50% with a falling wedge (one step backward). LLY broke wedge resistance and the 40-week SMA over the last three weeks.