Have you ever watched a sector sleep for years, quietly building energy like a coiled spring, only to suddenly explode higher when nobody’s paying attention? That’s exactly what seems to be unfolding right now in medical device stocks.
November delivered something rare: healthcare wasn’t just strong, it was dominant. While the broader market chopped around, the S&P 500 Health Care sector surged over 9% – leaving everything else in the dust. And buried inside that move? A technical setup that’s making chart watchers do double-takes.
The Pattern Years in the Making
Picture this: after peaking back in 2021, medical device stocks spent four long years digesting those gains. Not crashing, mind you – just grinding sideways in a massive range while the rest of the market went on its merry way. To technical analysts, this wasn’t random noise. It was the “cup” forming.
And now? The “handle” has completed. The iShares U.S. Medical Devices ETF (IHI) – the cleanest way to play this entire group – just broke out above resistance that’s held since May. This isn’t some minor wiggle. This is the kind of structural shift that can mark the beginning of major moves.
Why the Cup-and-Handle Matters
First, let’s be real – most chart patterns are noise. But the cup-and-handle, when it forms on longer timeframes with the right characteristics, has legitimate predictive power. We’re talking about a pattern identified decades ago that still works because it captures actual human psychology: long periods of distribution giving way to accumulation, followed by the “smart money” tipping their hand through a final shakeout (the handle).
When you see a true multi-year cup-and-handle resolve to the upside, especially with expanding volume and momentum confirmation, you have to pay attention. These can mark the beginning of secular bull phases.
The current setup in IHI checks almost every box:
- Cup depth of roughly 35-40% from 2021 highs (healthy, not excessive)
- Rounded bottom formation over years (not a sharp V – which are less reliable)
- Handle forming in the upper half of the cup with declining volume (classic)
- Breakout above $63 resistance on expanding volume
- Monthly MACD and stochastic both turning higher for the first time in years
The Price Target That Raises Eyebrows
Here’s where it gets interesting. The measured move from this pattern – taking the depth of the cup and adding it to the breakout point – points toward approximately $80 for IHI.
That’s not some wild speculation. That’s the textbook projection. And from current levels around $64-65? We’re talking about another 23-25% upside just to reach the conservative target. Some of the individual names inside the ETF have even more explosive potential.
Individual Names Already Confirming
The best breakouts never happen in isolation. You want to see leadership emerging. And that’s exactly what we’re getting:
- IDEXX Laboratories pushing to fresh all-time highs
- STERIS breaking out with authority
- Even the laggards like GE Healthcare and Medtronic showing signs of life after multi-year turnarounds
When the generals (the strongest stocks) are charging and the troops (former laggards) are finally following, that’s when sector moves become sustainable.
The Weekly Chart Tells the Real Story
Zoom out to the weekly timeframe and something even more compelling appears: IHI has now cleared the weekly cloud model – a form of dynamic support/resistance that’s particularly respected in longer-term technical work.
The upper boundary of this cloud is actually rising into the second quarter of 2026. Translation? The path of least resistance appears higher for many months to come.
Relative Strength Turning the Corner
Perhaps most importantly for 2026 positioning: the ratio of IHI to the S&P 500 is finally showing signs of bottoming after years of underperformance.
We’ve got the ratio above its 50-day moving average with that average itself turning higher – the first meaningful shift in relative momentum since the 2021 peak. In plain English? Medical devices are starting to beat the market again, and this tends to persist when the technicals align like this.
I’ve followed these kinds of rotations for years, and when a defensive growth sector like healthcare devices starts showing this combination of absolute and relative strength after a multi-year consolidation… well, let’s just say portfolio managers tend to notice.
What Could Go Wrong?
Nothing’s guaranteed, of course. A decisive failure to hold above $63 would invalidate the breakout and likely lead to retesting the $59 area (where long-term support sits). Broader market turbulence could overwhelm sector-specific strength.
But right now? The weight of evidence – across multiple timeframes, with multiple confirmation signals – leans heavily bullish.
Sometimes the market hands you these gifts: a classic pattern completing after years of preparation, breaking out as the fundamental narrative (aging population, medical innovation, defensive growth characteristics) remains firmly intact.
Whether you’re a trader looking for the next hot sector rotation or an investor positioning for 2026, medical device stocks just put themselves squarely on the radar.
The cup is full. The handle is complete. And the breakout is underway.
The question now isn’t whether this sector is waking up.
It’s whether you’re paying attention.
