Health care was the leading sector for several years, but when the market stumbled this past summer it was not able to recover.

Currently, many areas within the sector show long-term breakdowns on the charts and are on the verge of ending corrective bounces.

Health care products maker Abbott Laboratories (NYSE: ABT) is a good example, and thanks to the market’s sell-off to open the year, it has already broken down again.

We’ll start with the big picture by looking at the weekly chart, which shows a 25% drop from mid-July to late September. To call that a mere correction would be wrong; although calling it a bear market for reaching the 20% loss threshold would be just as wrong. To me, this was a serious break that ended a four-year bull market. 

After such a move, we’d expect the stock to lick its wounds for a while, but Abbott had the good fortune of a broader market that came roaring out of its own decline. However, the S&P 500 was down “only” 12% over the same span, which is far more palatable in what at the time could still be considered a healthy market. 

#-ad_banner-#​ABT bounced with the S&P 500, but as the index regained nearly all of its losses, the stock could muster only about a 50% recovery. That left a bear flag on the weekly chart that was just broken to the downside this week. 

If the second leg down is the same size as the first leg from July, then we could see a drop to the $34 area, which is near the bottom of the last major correction from 2013. Followers of Elliott Wave analysis might see a classic setup for an A-B-C correction and be even more bearish. The second leg lower — the C-wave — is usually much greater than the first leg — the A-wave. 

But let’s not get too far ahead of ourselves and instead look for a more traditional swing trade.

The daily chart below shows ABT stalled over the past few months to form a rectangle or trading range. Not far above the upper border of the range is the 200-day moving average, which instantly gives us an idea that the stock is not healthy.

On Monday, the gap down opening broke the range to the downside, allowing us to project a possible first downside target. The height of the pattern, approximately 3 points, projected down from the break point suggests that the first target would be just under $41. 

Bolstering the bearish view are a set of technicals all showing bearish divergences over the past few months. Momentum indicators such as stochastics set lower highs as prices stayed in the range. Cumulative or on-balance volume had the same condition. And, of course, the relative performance line versus the S&P 500 broke down. 

The second and more likely target is approximately $38. That would be two times the height of the trading range projected lower. It would also take the stock below its September low for a continuation of the long-term breakdown and close to a 50% retracement of the entire 2011 to 2015 rally.

Recommended Trade Setup:

— Sell ABT short at the market price
— Set stop-loss at $45
— Set initial price target at $38 for a potential 11% gain in eight weeks 

Note: If you’re interested in making quick downside profits, my colleague and trading prodigy, Jared Levy, has recommended trades that returned 36%, 51%, 62% and 69% in the past few months alone. And with each of these trades, he had no more than $530 at risk. His strategy sounds too good to be true, but I promise you it isn’t. To learn more or get on the list to receive his next trade, follow this link.

This article was originally published on ProfitableTrading.com:​​ This Health Care Stock Is Set To Tumble