BIOTECHS HELP BOOST HEALTHCARE SECTOR -- AMGEN IS MOVING HIGHER -- BIOGEN IDEC BREAKS OUT -- HEALTCHARE IS GETTING BETTER
BIOTECHS ARE DAY'S STRONGEST GROUP ... Biotech stocks are not only helping the healthcare sector today; they're also the day's strongest industry group. And their charts are starting to look more promising. Chart 1 shows the Biotechnology Index in an apparent "ascending triangle" pattern (see converging trendlines). That's usually a bullish pattern. [An ascending triangle appears when the upper line is flat and the lower line is rising]. The relative strength line along the bottom may also be turning up. The RS line bottomed in August (first green arrow), turned down in late September (red arrow), and appears to be trying to turn up again (second green arrow). I like to see strong chart action combined with a rising RS line. Chart 2 shows the Biotech Holders (BBH) which are the day's top sector ETF. The BBH is trading over both moving average lines and is starting to show better relative strength as well (see blue arrow). It still needs to get through its early October high to turn its major trend higher. But it appears to be moving in that direction.
Chart 1
Chart 2
AMGEN IS BIOTECH BELLWETHER... Amgen is often considered a bellwether for the biotech group because of its size. It accounts for 27% in the Biotech ETF (BBH). And it's one of today's biggest gainers. Its daily bar chart shows AMGN having broken through resistance along its September/November highs, which turned its trend upward. Its relative strength line (plotted against the Biotech Index) also shows Amgen to have emerged as a biotech leader. Its RS line turned up in early November and appears to be nearing a bullish breakout of its own. The weekly bars in Chart 4 also show bullish promise. After having broken its 2004 down trendline (see circle), Amgen has risen to the highest level in nine months. Its weekly RS line (also plotted against the BTK) shows AMGN starting to show upside leadership after having been a biotech laggard for more than a year. It's usually a good sign for any group when its biggest stocks start pulling their weight. Amgen isn't the only big biotech stock that's pulling the group higher. So is Biogen Idec.
Chart 3
Chart 4
BIOGEN IS BREAKING OUT ... Here's another biotech biggie that's having a very good chart day. Biogen Idec is breaking through its autumn highs on rising volume. Its relative strength line (versus the Biotech Index) has also turned up. That's a bullish combination for both. BIIB is also important because of its size. It's the third largest holding in the Biotech Holders (10%). The fact that it's moving up for a challenge of 65 also has longer-term significance. The reason why is shown in Chart 6. The weekly bars show BIIB having been in an eight-month trading range between 55 and 65. A close over 65 would represent a bullish breakout on the weekly chart and would put the big biotech leader at the highest level nearly three years. The BIIB/$BTK relative strength line is turning up again after slipping since midyear. Biogen Idec is also the biggest percentage gainer in the healthcare sector which is today's upside leader.
Chart 5
Chart 6
HEALTHCARE IS GETTING BETTER... This is the same headline I used last Thursday when I last wrote about this sector (December 02, 2004). In that earlier piece (which also included upbeat comments on biotechs and drugs), I wrote that healthcare was "moving up in the relative strength rankings". Year-do-date, the Healthcare Select Sector SPDR has been the market's weakest sector (-4%). It moved into positive territory over the last month. Last week, it moved up to third place in the rankings (behind technology and consumer staples). That newfound strength can be seen in its rising relative strength line which has climbed above its (blue) 20-day moving average line (see second arrow) by the biggest margin since May (first arrow). The RS line still has a ways to go to break its 2004 down trendline. But at least it's heading in the right direction. The chart of the XLV shows it having broken a six-month down trendline. It still needs to clear its 200-day average -- and its September high -- to turn its trend upwards. As I said last week, however: "If you're looking for an undervalued and somewhat overlooked place to put some money at this point, healthcare may be a good place to look". One of our readers asked yesterday where to put some money coming out of commodity-related stocks. I'd put some of it into healthcare.
Chart 7
MORE HEALTHCHARE LEADERS ... I don't want to give the impression that biotechs are the whole healthcare story. Here are two more healthcare leaders -- AmerisourceBergen and Tenet Healthcare. Both ranked near the top of the healthcare percentage leaders over the last week. Both are trading over their 200-day averages and appear to be in early stages of new uptrends. Their relative strength lines have only recently started to rise (see blue circles). Chart 10 shows the Pharm Holders (PPH) which are still the weakest part of healthcare. A move up through its November/December highs is needed to improve its outlook. The fact that the healthcare sector is starting to move higher, however, may exert an upward pull on the lagging drug stocks.
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Chart 9
Chart 10
