McKesson (MCK) stock has been on the best-performing-stocks list this year.
The stock of the health-care-products and -services giant is up 54% so far in 2022, easily dominating the S&P 500’s loss of 16%.
Noteworthy is that none of the FAANG holdings — or any megacap tech for that matter — has generated a positive return on the year.
In fact, McKesson is the S&P 500’s second-best performing non-energy stock so far this year, trailing just Cardinal Health (CAH) and its 56% year-to-date return.
Why does this relative strength matter?
Back in June, I wrote a piece about the three best charts in the market. It was around the same time the S&P 500 was hitting new 52-week lows.
McKesson was on the list at about $308 a share — it's up 25% since — along with Exxon Mobil (XOM) and Sanderson Farms.
Of those picks, McKesson and Exxon have both hit 52-week highs within the past month, while Sanderson Farms was in the midst of being acquired and has since been bought.
While it's only a small case study, one can clearly see why relative strength is vital for traders. Until the trend breaks, stick to what's working.
Trading McKesson Stock
Chart courtesy of TrendSpider.com
As I look at the chart, this stock still looks incredibly healthy. For months, McKesson stock struggled with the $335 to $340 zone before finally breaking out in August.
At the time, the market was trading well too. But it soon rolled over and went on to test new 52-week lows. Not McKesson, though.
The shares did trade lower in September and October, but not back below the $335 to $340 breakout level. In other words, prior resistance became major support, which allowed McKesson to roar to new highs once the selling pressure in the broader market subsided.
Bulls who are currently long can stay long this stock so long as it stays above the 10-day and 21-day moving averages, as well as the $370 to $375 resistance level.
With any luck, investors will get another opportunity to buy McKesson on a dip to its 21-week moving average, which has been pretty solid support for most of this year.
If we get a further breakdown, perhaps the shares will retest the vital $335 to $340 zone, alongside the 200-day moving average and the weekly VWAP measure.
On the upside, let’s see if McKesson retests $400. If so, the bulls can consider booking some profit and seeing whether the shares can break out over this level.
