Healthcare Flexing Muscles:
Although healthcare still languishes near the bottom of the major S&P sectors on a YTD basis (XLV currently 10th best of the 11 up 10.6% in 2019), it has made some hearty moves recently, pun intended. On a one month look back period it is the best of eleven, beating out technology by nearly one percentage point. It has received help from many different areas of the healthcare arena. Biotech, via the XBI is looking for its first 5 week winning streak since early 2016. Equipment names have been firm all year as the IHI sits just 2% off most recent 52 week highs. The healthcare providers ETF, the IHF, is now firmly back above its 200 day SMA. The XLV just broke above a double bottom base as seen on the chart below, and some of its components are demonstrating solid action. PFE is up nicely this week, by 4% and if it holds would be its best weekly advance in 9 months. MRK refuses to trade below its 200 day SMA, and of course BIIB put up a monster move last week although it did nearly fill in an upside gap from the 3/20 session. The overall group is firing on all cylinders for the first time in awhile, and many may declare its poor leadership for the current market environment, but PRICE action can not be denied.
Round Number Roadblock:
Stocks will often be rejected at very round numbers, or at least pause (most influential round figures are 20, 50 and 100), especially their first time doing so. Below is an illustration of that at the round par figure, although this name was above 100 previously. First let’s give credit to NBIX for acting well on an overall shaky healthcare tape on a YTD basis. The stock is on a current 3 week winning streak that rose nearly a combined 10%, and on the WEEKLY chart, it sports a 14 month cup with handle base with a pivot of 102.61. Before that however one can enter with a CLOSE above the 100.25 trigger in a bull flag formation. It trades 15% off most recent 52 week highs, and for 6 weeks in a row, the weeks ending between 8/23-9/27, it was above 100 intraweek, but recorded just one CLOSE above par the week ending 9/20. There is a big tug of war going on and this line in the sand, could potentially see a robust move if taken out to the upside (REPORTS earnings 11/4 after close).
The longer the base the greater the space, upon the breakout. One can also add that the trade will be more success prone. Below could be a good example of just that with the chart of ARQL and how it appeared in our 10/9 Healthcare Note. One can see the nearly perfect retest of a 10 month cup base breakout the week ending 10/4 that rose more than 18%, and recorded a bullish piercing line candle in the process. The next 3 weeks it gained a combined 14%, AFTER that big move. It is still 22% off most recent 52 week highs, and dealing with the very round 10 number, touching it the last 2 sessions. One can add to or open a position, in my opinion, with a CLOSE above 10 and that would have the right side of a potential cup base pivot of 12.32 to be watched into year end. The stock REPORTS Wednesday morning, and has had a nice run since a gap fill on 9/30 from the 6/13 session.