Still A Rolling Bull Market?

Markets no question have been wounded this month, but we have to keep in mind the S&P 500 and Nasdaq are still just 5 and 6% respectively off their all time highs. The “rolling” nature of the preceding big overall move was helped as different sectors displayed strength when “leading” groups needed time to rest and recapture their stamina. Could it be time for healthcare to fill in that role? The ratio chart below suggests a glimmer of hope that it may be about to occur. In uncertain times investors seek safer groups (of course biotechs are not the more mature names within the very diverse space), and healthcare may benefit. The round 80 number needs to hold on the ETF, but there have been some respectable moves in individual names. Of course AMGN fits the bill, but more obscure names like MEDP VNDA ACAD IONS SNN NUVA and NVCR to name a few, give some belief in the battered group.

Healthy Start:

This year has seen some high profile names come public. LEVI, LYFT and UBER are well off their recent lows (UBER is back to its original IPO price). Below is the table from IBD of the best performing new issues this year. Half of them happen to be healthcare related. Some currently look good, with TPTX forming a double bottom pattern, and ADPT on a 6 session winning streak. Others like SWAV, are now lower by 40% from most recent highs, and this name is looking at a potential 10 week losing streak depending on this Thursdays CLOSE (in the middle of this streak was a 3 week period with the weeks ending 5/3-17 CLOSING all within just .23 of each other, and that type of action normally leads to explosive moves). Others like MRNA are now lower by 56% from most recent highs. Moral of the paragraph, give these newly born stocks time to form bases. Many will trade wide and loose, making them tough to have an edge. But at the same time those that trade taut, be ready to pull the trigger when necessary.

Examples:

Market participants should expect trades to go against them. Some of the best have win ratios well under 50%, but they more than make up for it with letting winners run. Below is the chart of STE and how it was profiled in our 7/30 Healthcare note. A stop of 144 was hit on 8/5, as we were WRONG, but its is a good example of being able to get back into a leader, even after getting stopped out. Last week on 8/6 it broke powerfully above a double bottom pivot of 151.03, and today demonstrated good action on an awful tape. Remain nimble until the overall markets resume their uptrend, and this name should be at the top of any healthcare traders list.

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