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Latest From The Blog
Healthcare Sector Review: 9/23/19
Stamina Questions: Healthcare feels like its on life support, but is it dead? One should not firmly declare that feeling, as it did record its first 4 week winning streak since last December and early this year. The gains were mild the last 3 weeks, but it was the best performing group last Friday, on a soft session. We know trends tend to persist, much more likely than they are to reverse, so overall one should proceed with caution. The argument that this space will outperform if investors become conservative is flimsy at best. Obviously market participants have become yield starved, but healthcare has not kept pace with the bond proxy like groups on a YTD basis, like real estate and utilities have (currently the XLRE and XLU are the 2nd and 4th best major S&P sectors in 2019 thus far). Dead Weight: The chart below shows the YTD performance thus far of all the major S&P sectors. Each of the 11 are positive, but if you want to make an individual stock analogy, one could comment on the "weakness" of healthcare. In a broad bull market, the vast majority of stocks will rise, but that is where stock picking comes into play, as the more astute investor will find leaders that could rise 40-50% or more, while the median stock will rise 10-12%. Should the fact that healthcare is "lagging", mean traders should avoid seeking names in healthcare? Not necessarily, but keep in mind the bulk of a stocks gain emanate from the very specific sector it comes from. Examples: The mega cap pharma names saw value in spinning off animal related names. Of course they do pet owners will spend wildly at the veterinarian office. However the stocks of the newly created names have diverged on different paths since trading on their own. PFE which spun off ZTS, has been the winner higher by 47% YTD and 39% over the last one year period. Below is the chart of ELAN which was spun off from LLY, and how it was presented in our 9/16 Healthcare Note. It is LOWER by 13% YTD and down 24% over the last one year period. The suggested pivot was NOT hit, but I believe this one trends lower. It demonstrated poor relative strength this week falling 4%, while the PPH ROSE 1.2%.
Technology Sector Review: 9/20/19
Anything But Secure: As the software arena attempts to navigate its way to a potential bottom, some sub sectors in the space are not cooperating. Below is the chart of the HACK ETF, which represents the security names. Against the IGV its performance has been forgettable. On a one year look back period the HACK is actually DOWN 2%, while the IGV has risen a tepid 9%. Over a much shorter time frame, the IGV sits 6% off its most recent 52 week highs, while HACK is 9% from its most recent yearly peak. Top component SYMC, which has activist involvement, bounced off the very round 20 number on 8/7, and has advanced firmly since. Others in the top ten of the fund like SAIL, a somewhat recent IPO, now trade 40% off most recent 52 week highs. More established names like FEYE, which was rejected at the very round 20 figure last November-December, are trading incompetently. Let the dust settle where it may on the security names, and wait for bottoming candles to surface. It makes the catching knives a bit less messy. Semi Awakening? The semiconductor space has been the creme of the crop within technology recently. We believe this nascent trend will continue. Focusing inside the group some names have responded much better than others and they deserve the bulk of any capital you are willing to allocate to the space. Below we take a look at a name AMKR, that on first glance would seem strong trading just 5% off most recent 52 week highs. A longer term look, would show it has been meddling in the single digits for a year and a half. I prefer to buy leaders, but some turnaround plays are worthy of speculation. We spoke of the round 10 number thwarting some consumer names in our last 2 daily reports, but this one could see a move above that very round number. It has a beach ball held underwater feeling, but as always demand PRICE confirmation on a CLOSING basis. Examples: To be a part of two strong groups is certainly a blessing. The solar space has been with the TAN higher 26 of the last 38 weeks, beginning with a 9 week winning streak beginning with the week ending 12/28/18, and this week has added another 8.4% heading into Friday. Below is the chart of FSLR, which has exposure to the semiconductor space, and how it appeared in our 9/12 Technology Note. For 6 weeks the stock was rejected at its 50 day SMA, but that all changed this week. It now trades just 3% off most recent 52 week highs, and is approaching an add on with a potential break above a cup base pivot of 69.34. On its WEEKLY chart that same trigger can be interpreted as a cup with handle base that began the week ending 4/27/18.
Consumer Sector Review: 9/19/19
Round Ten Roadblock: In yesterdays Consumer Note we discussed a couple names, APRN and PIR, that underwent recent reverse stock splits and have in our opinion made unwarranted, oversized moves. They met a brick in the wall at the round 10 number, and another undeserving stock to do so this week is MIK. It is weighed down by debt, and is a name that has undergone something we feel could be just as bearish as a reverse stock split, being taken private and coming public again. Party City or BJ's Wholesale Club come to mind. Below we take a look at the chart of MIK, and it too doubled recently, but still trades 51% off most recent 52 week highs. These names are tricky to trade, but it is again just an illustration of the wildly aggressive moves we have seen from many names in the space. We used the adjective frothy on Wednesday, maybe a better word Thursday would be bubbly in regards to the retail laggards. 50 Day Plunge: The homebuilding names have been front and center with the constant talk regarding interest rates. The XHB has benefitted as the fund is just 1% off most recent 52 week highs. Other groups that have appreciated due to their reliance on the space are some of the home improvement retailers. RH has advanced 14 of the last 15 weeks, and risen nearly 100 handles in the process. SITE, a landscaping play has gained 22 of the last 32 weeks. Below we take a look at the name of POOL, a former best of breed name. Its chart is sporting some possible leaks, pun intended, as it carves out a bear flag formation. Last week it fell by 5.7%, its largest weekly loss in 10 months in active volume too. A bearish evening star was completed on 9/8, and has seen brisk follow through to the downside, undercutting its 50 day SMA. Keep your life preservers on until it recoups that line. Examples: With the election rhetoric heating up, some names that will seem to benefit would be Twitter, and the New York Times. There is certainly some bifurcation going on between the two stocks, and below is the chart of the latter, NYT, and how it appeared in our 9/3 Consumer Note. It is now near bear market mode down 19% from most recent 52 week highs, and reeling after a recent earnings slide of more than 12% on 8/7, with the next session pushing below the 200 day SMA. It has now CLOSED below that long term secular line for 6 weeks, and the longer it stay there the worse. This is a good example as well of the red flag nature of breakouts unraveling too quickly. Maintain a bearish stance as long as it swims below the 200 day.
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