High Beta-Low Volatility Affecting Healthcare Too:
Much has been made about this comparison in the overall market, and it is a relevant one. But below we take a look at the ratio chart compared the more mature, dividend paying names with the XLV, against the higher beta biotech plays with the XBI. The chart here shows the relationship at a potential crossroads. It should not be a huge ask for biotech to outperform on a relative basis against the XLV, as 3 of the 4 top components in the ETF, in JNJ UNH and PFE are 9, 18 and 22% off their most recent 52 week highs. We did post an XBI WEEKLY chart earlier this week showing how it has CLOSED well off the intraweek lows the last 2 weeks, and both finished above its 200 day SMA. This week is higher by 2% and going for its first 3 week winning streak since early January.
Muted Chatter On Name Which Prior Was Just The Opposite:
A stock that was formerly talked about incessantly by many on the long side months ago, has suddenly turned to crickets. Many were most likely wrong, but the fact that investors have left the name for dead could be a good sign. Of course PRICE action supersedes all else, and in that regard one can look at the stock with a lukewarmly bullish tint. This is NOT a recommendation, although AMRN which is still 33% off most recent 52 week highs, has quietly followed through nicely thus far this week rising more than 5%, after last week jumped nearly 6%. On its WEEKLY chart it has made a pattern and series of higher lows at the 10, 12 and 14 numbers. A triple top near 23 has burned many, and I have no idea whether those highs will ever be hit again, but give it credit currently for peeking its head above its 50 day SMA, which coincides with a break ABOVE a bearish descending triangle.
Obviously the longer a base is, when the breakout occurs it will be more success prone. Below is the chart of SGEN and how it appeared in our 10/9 Healthcare Note. Notice this bullish ascending triangle formed over a one year time period, and it aligned with the round 80 number forming a “cluster of evidence”. Give it credit for performing well in an overall weak healthcare space. It currently trades just 5% off most recent all time highs, and this stock actually retested the breakout that very same 10/9 session and jumped off the 80 figure, a good sign as former resistance now very well could become support. Keep in mind it is not uncommon for breakouts to retest the move to test its validity and attempt to shake weak shareholders out.