ANOTHER LOOK AT SOME INDIVIDUAL DRUG LEADERS -- BMY HITS NEW 52-WEEK HIGH -- NEW MONEY VERSUS ROTATING MONEY
BRISTOL MYERS SQUIBB HITS 52-WEEK HIGH ... Last Tuesday I wrote a piece on the revival of drug stocks and the healthcare sector which were starting to show market leadership April 05, 2005. Part of that was due to their generally defensive qualities. One of the three drug leaders that I recommended was Bristol Myers Squibb April 05, 2005. Chart 1 shows the stock breaking out to a new 52-week high today as part of a strong pharmaceutical group (which is trading at a new six-month high). BMY's relative strength line, which turned up at the start of March, has risen to highest level since last June. The weekly bars in Chart 2 show that the stock is starting to outperform the S&P 500 for the first time in two years. The weekly chart shows that the next upside target is its early 2004 peak near 30. The monthly bars in Chart 3 show that BMY has been trading sideways in a bottoming formation for the last three years. A close over 30 would represent a major bullish breakout. Chart 3 also shows how cheap is the stock still is based on its historical price range.
Chart 1
Chart 2
Chart 3
ABBOTT LABS AND JNJ CONTINUE TO LEAD ... Two other big pharmas that I recommended on April 5 were ABT and JNJ. Since then Abbott Labs has broken through its January high at 48. Its weekly bars show the next major upside target to be its early 2002 peak at 52.70. Its relative strength line has been rising since the start of 2004. Chart 6 shows that Johnson & Johnson (which is the group leader) recently broke out to a new record high. JNJ has also been outperforming the S&P 500 for the last year.
Chart 4
Chart 5
Chart 6
SOME DRUG LAGGARDS... The last three charts have been drug laggards, but are having a strong day today. Lilly is surging on very strong volume. Schering Plough has been rallying throughout April. Wyeth is nearing a test of its January high. It's hard to find a drug stock that isn't up today.
Chart 7
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Chart 9
NEW MONEY VERSUS ROTATING... Last Tuesday I recommended putting some money into the drug or healthcare ETFs (PPH or XLV) or one of the individual leaders among ABT, BMY, and JNJ. At the end of the week, I also recommended holding off on committing new funds to the market until it showed some upside progress. While those two recommendations appear to be at odds with one another, they're not. Here's why. I don't favor putting "new" money into the market at this point. I do, however, favor "rotating" some money out of groups that are starting to weaken (there are lots of those) and into groups that are starting to show upside leadership. Drugs and healthcare also qualify as defensive groups. Hence the headline on my April 5 story on drugs and healthcare: "Another Defensive Group to Consider". I'll take a look later today at some groups that are weakening -- including basic materials and energy.
