Sturdy PRICE Action:
Although healthcare still remains the second “worst” performing major S&P sector YTD (XLV higher by 6.5% so far in 2019), on a one week and one month timeframe it is acting much better as it is the fifth best actor among the 11 groups. The chart of the ETF below has some things to like. The 200 day SMA is beginning to slope higher once again, and it has been quick to recoup the important line this month on a CLOSING basis. It is tightening up as it meets stern resistance at its 50 day SMA, and the fund could be on the verge of a big move higher. Give the ETF credit for being just 5% off most recent 52 week highs, given that 3 of its top 4 components are JNJ, UNH and PFE trading 11, 15 and 24% off their most respective yearly peaks. If any or all start to move higher it will act as a nice tailwind.
Biotechs Sending Mixed Signals:
In last weeks Healthcare Note we mentioned that we were positive on the relationship between the XBI and SPX going forward into year end, based on the ratio chart. That feeling still exists, but one has to have an open mind, and below is the PRICE chart of the XBI. The ETF is still 17% off most recent 52 week highs, but if it can manage to break ABOVE the bearish descending triangle, keep in mind breaks in the OPPOSITE direction tend to be very powerful. Still it must be kept in the penalty box, and there is nothing to do here on the XBI as the chart is in no mans land. Focus on individual leaders, or laggards in the space and trade accordingly.
It is always important to keep an eye on stocks that are acting well in a group that is underperforming. That type of strength will often result in the particular name being one of the first out of the gate sprinting higher, once the space catches some love. Below could very well be an example with the chart of NBIX and how it appeared in our 8/13 Healthcare Note. It is still 22% off most recent 52 week highs, but higher by 38% YTD. The stock is looking for an 8 week winning streak depending on Fridays CLOSE, and is off to a good start up 1.5% Monday. Not surprisingly it is having issues with the very round par number, but looks like it may be temporary as the right side of a cup base on the WEEKLY chart is nicely taking shape.