Group Overview:

  • Without big bifurcation during the last session of 2018 on Monday, a half day, between healthcare and the utilities, the healthcare space will be the best performing major S&P sector (would be its first time at the top of the sector leaderboard in over a decade). Only 3 of the 11 groups are currently in the green YTD, and discretionary is holding on by a thread. It certainly demonstrates the defensive posture the markets took this year. The XLV currently sits 11% off most recent 52 week highs, and this week put an end to its first three week losing streak in over a year, advancing 3.1%. Volume trends since October have been very bearish. The weeks ending 10/12, 10/26 and 12/21 fell 3.4, 4.5 and 7.1%, all accompanied by volume twice the weekly average. Give credit to the ETF for holding up lukewarmly well given this months 10% haircut from its largest component JNJ. ABBV, the XLV's fifth largest name, should be put on investors watchlist. It reversed Friday after touching its downward sloping 200 day SMA for the fourth time since June. The stubbornness of that resistance should be ebbing with each kiss of that secular line. A move above, and CLOSE, could be robust.

Looking Into the Diversity of Healthcare:

  • Peering into some of the different arenas of the overall group just after the February correction, two things stand out to me. The consistent lagging from the biotechs via the IBB, and the power of the small cap names, through the PSCH between March and September. That small cap outperformance turned into a tailspin, and the ETF is now off 26% from its most recent 52 week highs. It lost value 12 of the last 17 weeks, and the three weeks ending between fell by a combined 22.7%, highlighting its volatile nature. The IBB will be potentially coming up on an important retest of the very round par number, that it sliced below the week ending 12/21 losing almost 11% in big trade. That level was good support numerous weeks since breaking above 100 the week ending 6/23/17. Its success could depend on its largest component AMGN which sits just 9% off its most recent 52 week highs (great relative strength against IBB which is 23% off its recent highs), compared with the "old big four", as BIIB, GILD and CELG trade 24, 31 and 43% respectively off their own recent 52 week highs. 

Examples:

  • The cannabis space has certainly sprung to life in 2018 with CGC getting a $4 billion investment from STZ this August. For those that missed the big move, that more than doubled following the announcement, it has now filled in the gap from the 8/14 session on 12/21. Altria recently made its own investment in CRON, as names jockey to get a strong foothold in the space. TLRY is now 75% off its most recent 52 week highs, and displays the round number theory with a precise puff, pun intended, off the very round 300 number on 9/19 before its descent. Below is the chart of more established member of the arena, GWPH and how it appeared in our 12/19 Healthcare Report. It reiterates the virtue of patience as there will be sizable drawdowns in any nascent industry, and this stock has been cut in half from the recent September highs. The stock bounced off the very round 90 number on 12/27, but is still well below the bear flag breakdown.

Special Situations:

Vastly outperforming peer WAGE which is DOWN 57% YTD. HQY is a healthcare name higher by 24% YTD and 23% over the last one year period, even after now trading 43% off most recent 52 week highs. Earnings have been mostly higher with three straight gains of 2.6, 4.4 and 11.5% on 9/5, 6/5 and 3/20 before a recent loss of 11.4% on 12/6. The stock is lower 5 of the last 7 weeks, with all five declining weeks losing at least 9%. A warning was seen after the quick failure of a cup base trigger of 100.09 taken out on 11/7. It did complete a bullish morning star pattern on 12/26 rising more than 7%. Enter HQY on a pullback at 57.25.

Trigger HQY 57.25.  Stop 54.25.

Touching 200 day SMA for first time since beginning of May. RGEN is a medical equipment play higher by 41% YTD and 42% over the last one year period. Earnings have been well received with gains of 17.2, 5.7 and 8% on 11/1, 5/8 and 2/22 and a loss of 1.6% on 8/2 (August drop was bullish hammer that CLOSED above 50 day SMA). The stock ended a nasty 3 week losing streak, that slumped more than 26%, this week advancing 4.8%. Respect its powerful run which recorded a 24 of 31 week winning streak that traveled from the round 30 to 60 figure between weeks ending 2/16-9/14. Enter RGEN on pullback into bullish morning star at 50.50.

Trigger RGEN 50.50.  Stop 48.

Just one CLOSE below the round 30 and 50 numbers on 11/20 and 9/13. TNDM is a medical equipment play higher by 1481% YTD and 1455% over the last one year period. Earnings have been mostly higher with three straight double digit increases of 10.9, 10.5 and 14.7% on 7/31, 4/26 and 3/2 before a recent small loss of 1.6% on 11/2. The stock is lower 11 of the last 15 weeks and now sits 29% off most recent highs. Earlier this year it recorded a very powerful run rising 18 of 19 weeks ending between 2/16-6/22. The more times a line of resistance, or support is touched, the more likely it is to break through. Enter TNDM on a pullback at 36.50 and add to through cup base trigger of 52.65.

Trigger TNDM 36.50.  Stop 34.

Treat this name as speculation play as it now sits 57% off most recent 52 week highs. CTMX is a biotech play lower by 29% YTD and 32% over the last one year period. Earnings have been mostly lower with three straight losses of 2, 6.6 and 4.1% on 8/9, 5/10 and 3/8 before a very strong gain of 25.1% on 11/7. The stock is higher 4 of the last 5 weeks, and this week recorded a bullish engulfing candle rising 11.7%. To be fair it registered a nasty 26 of 37 week losing streak the weeks ending between 3/16-11/23. Enter CTMX here as it has CLOSED above its 50 day SMA for three consecutive sessions, a line it has been underneath since early August.

Trigger CTMX here.  Stop 13.75.

Big negative not being able to be propped higher by strong overall healthcare group, and software among technology. MDRX is a medical software laggard lower by 35% YTD and over the last one year period. Earnings have been mixed with gains of 10 and 1% on 8/3 and 5/4 and losses of 18.9 and 6.8% on 11/2 and 2/16. The stock has fell 12 of the last 18 weeks and now trades 41% off most recent 52 week highs (includes weekly losses of 21.5 and 12.5% ending 11/2 and 12/21 with both registered largest weekly volume of 2018). Short MDRX here as it retests bear flag breakdown at 9.50, which carries a measured move to 5.

Trigger MDRX here.  Buy stop 10.60.

Good luck.

Trigger summaries:

Buy pullback into recent bullish morning star pattern HQY 57.25.  Stop 54.25.

Buy pullback into recent bullish morning star pattern RGEN 50.50.  Stop 48.

Buy pullback into break above 50 day SMA TNDM 36.50.  Stop 34.

Buy trend change with name back above 50 day SMA CTMX here.  Stop 13.75.

Short throwback into bear flag breakdown MDRX here.  Buy stop 10.60.

 

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