BIOTECH INDEX HITS NEW RECORD -- GILEAD BREAKS OUT WHILE BIOGEN TESTS MAJOR RESISTANCE LINE -- GENZYME IS BIOTECH STAR OF THE WEEK --

BIOTECH INDEX EXCEEDS SPRING HIGH... We've written several bullish articles on biotechs over the past few months. Here's another one. The reason we're writing about it today is obvious from Chart 1. That chart shows the AMEX Biotechnology Index (BTK) trading over its spring high. Its relative strength ratio (bottom of chart) has been rising since late August. Chart 2 is even more impressive. Its monthly bars show the BTK trading over its 2000 peak at 806. That puts the Biotech Index at a record high. The relative strength line in Chart 2 is also near a record high. We've shown several biotech leaders in the past including Celgene, Biogen Idec, and Gilead. We'll take another look at the last two and a new look at Genzyme which is really this week's biotech star.

Chart 1

Chart 2

GILEAD BREAKS OUT - BIOGEN TESTS MAJOR TRENDLINE... Chart 3 shows Gilead Sciences having just broken through its spring highs to hit a new record. Its RS line has been rising since late August. Chart 4 shows Biogen Idec rising steadily since April along with its RS line. The monthly bars in Chart 5, however, show that BIIB is at a critical juncture. That's because it's testing a seven-year resistance line drawn over its 2000-2005 peaks in what looks to be a bullish "symmetrical triangle". [A symmetrical triangle is identified by two converging trendlines]. A decisive close over its 2005 peak at 70 could signal much higher prices. The biggest percentage gain this past week, however, came from Genzyme.

Chart 3

Chart 4

Chart 5

GENZYME HITS NEW 52-WEEK HIGH ... The weekly bars in Chart 6 show Genzyme surging 4% this week and, in so doing, clearing its October 2006 high at 70.50. And it did so on strong volume. Its relative strength line below Chart 6 has just broken a two-year resistance line (see arrow). The means that GENZ is turning from a market laggard into a potential market leader. The monthly bars in Chart 7 put its long-term trend in better perspective. The stock has been consolidating for the last two years just above its 2001 peak near 64. During that time, its relative strength ratio (solid line) has been dropping. It looks like the price and RS line are turning up again. That's usually a good time to get on board.

Chart 6

Chart 7