How Quickly Things Can Change:
Just last week we mentioned that healthcare was the best performing major S&P sector over the last one month period. That has now changed as it is now the SIXTH best actor among the 11 groups. The XLV is lower by 2.1% this week so far, and is testing the bull flag breakout from 6/18. The bulls can say that it is just giving back some of the current 3 week winning streak that has risen more than 7%. But giving back so quickly after the breakout is concerning, and overall YTD it is the worst sector performer, albeit higher by 6.8%. It is trailing the second worst actor, the energy space, by nearly double that as the XLE is higher by 12.8% thus far in 2019.
Market participants are still favoring a defensive posture when it comes to the healthcare group. The ratio chart below shows just that, and investors should continue that stance. Now it has been more with the pharma plays as some of the bigger mature names have been falling a bit lately. AMGN seems to be failing at its declining 200 day SMA, GILD reversed precisely of the round 70 number Monday, and BIIB still is feeling the after effects of the 29% drop on 3/21. Even CELG, the last of the big prior four has fallen more than 6% the last 3 days, as it would need to divest a blockbuster drug to complete its deal with BMY.
We are big proponents of round number theory, and CLOSING prices. Below is a good example of this with the chart of AMRN and how it appeared in our 6/20 Healthcare Report. This name has been building the right side of a decent looking cup base, but the suggested trigger of 20.20 was never taken out. In fact it turned sour on 6/20 after coming within just 5 pennies of the 20 figure. It can still materialize, as it bounced off 50 day SMA support today, recording a bullish hammer. It has been trading somewhat listlessly, but give it credit for not giving back to much of the 440% plus weekly move in late September last year. Patience is the key.