The small cap biotech names are trying to keep pace with their larger peers. The PSCH is less than 1% from a good looking WEEKLY cup with handle pivot of 131.65 in a base that began in August '18. There are plenty of examples of strong stocks within the group, and today we take a look at Collegium Pharmaceuticals. In this post we will look at how one can buy, and add to a leader on the way UP, in both the past and present.
Providing Relief: The diverse healthcare sector is not an easy one to keep on top of. Looking at the five ETFs one most focuses on, the providers via the IHF was the best actor this week. The IHF also rose 1.9% (IHI rose by the same amount, although Friday did record a bearish counterattack candle). The XBI XLV and PPH rose between 1.6 and .7% this week. This is nothing new as the providers have been overlooked, but within healthcare it is the strongest subsector on one, three and six month timeframes (in fact on the 3 month look back period the IHF rose 28%, more than 10 handles above the second best space in biotech that jumped 18%). The reason this is my esteemed sub group is that the ETF is not as extended like the XBI or XLV. The IHF is just a few percentage points above a long cup base breakout. Top holding UNH is having issues with the very round 300 number, as it registered a bearish engulfing candle their precisely on 12/20/19. It most likely is a temporary roadblock, as it has risen 13 of the last 15 weeks.
It is no secret healthcare ended 2019 on a strong note. Trends in motion tend to stay that way. Below we have a look at the chart of ABBV, and how it appeared in our 12/9 Healthcare Note. This name could potentially be a big mover in 2020. Pharma play lower by 6% YTD and 4% over last one year period. Dividend yield of 5.4%. Higher 10 of last 14 weeks, and 3 of 4 decliners lost less than 1.5%. Could potentially be building right side of WEEKLY cup base that began back in January '18. Three straight mild positive earnings reactions, for pharma/biotech play, up 2.8, 1.6 and .8% on 11/1, 7/26 and 4/25. Enter with buy stop above bull flag. Breakout carries measured move to 109. Entry ABBV 88.50. Stop 85.75.
Scandal Fuel: The mega cap tech companies, which are responsible a good sized chunk of this secular, ongoing bull market have been prone to scandals. Whether it is looking back a few years to Facebook's Cambridge Analytica, or Google's Project Nightingale (AMZN has not been immune either). I am not here to judge what they were or what level of guilt there is, only to evaluate their PRICE action. And one can come to the conclusion that they were able to shrug off anything that was thrown their way, including talks of breaking up the three aforementioned behemoths. FB is now well above a 203.90 cup with handle pivot, we have spoke at length about AMZN in recent weeks, and below is the current chart of GOOGL. It is a WEEKLY chart and one can see the beautiful break above a bullish ascending triangle, which formed in conjunction with the round 1000 and 1300 numbers. The stock is on a 6 week winning streak, and up another 4.3% this week thus far, and if that holds would be its best WEEKLY gain since the 10% advance the week ending 7/26/19. The classic definition of a bull market is one that does not give one the chance to get in (lack of pullbacks). The tech giants are giving one a textbook case.
Retail Rouse: Some of the heavyweights in the consumer discretionary space are waking up, and it probably could not have come at a better time. Looking at the ratio chart of the XLY compared to the S&P 500, the consumer ETF has lagged. Sure some to the top ten components in the fund were faltering, but 2020 has turned over a new leaf. MCD is on a 6 week winning streak, and this week is higher more than 3% and bursting back above its 200 day SMA. SBUX is ready for a challenge at the very round 90 number, and if it can climb back above will likely head back to par sometime in Q1. AMZN is nicely building the right side of a cup base, with a potential pivot near the very round 2000 figure. BKNG is flirting with a double bottom with handle trigger of 2082.77, and of course other top 10 holdings in the XLY, like NKE TGT and LOW have been behaving nice all along. If the mega caps we mentioned earlier continue to move northward, after nascent rallies, 2020 could get off to an even more potent start.