CELGENE UPGRADE SPARKS BIOTECH BUYING -- AMGEN AND GILEAD HAVE PROMISING CHART PATTERNS -- ALEXION, ILLUMINA, AND VERTEX ARE IN CHART UPTRENDS -- SOME DEFENSIVE MONEY MAY BE MOVING TO HEALTCHARE
BIOTECHS ETFS HAVE STRONG DAY... On a day when most stocks and commodities pulled back a bit and the dollar bounced, healthchare was the day's top performing group. Biotechs were the main reason why. Charts 1 and 2 show Biotech iShares (IBB) and Biotech Holders (BBH) nearing the highs formed during the summer of last year. The BBH has been rising since achieving a golden cross (when the 50-day average crossed over the 200-day) in early July. Relatively speaking, however, biotechs have been underperformers since the spring. The solid line in Chart 2 shows the group's RS line peaking in March just as the stock market was bottoming. Biotechs have been underperformers since then. It's possible that some traders are starting to move into more defensive healthcare stocks on concerns that the market rally may be getting a bit tired. Today's buying was also sparked by a brokerage upgrade in Celgene which was the biggest biotech gainer.
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Chart 2
CELGENE JUMPS 5%... A brokerage upgrade pushed Celgene 5.0% higher today on rising volume. That was enough to make it the biggest gainer in a strong healthcare group. Chart 3 shows CELG climbing to a two-month high after bouncing off its 50-day day moving average. The uptick in its relative strength line (below chart) shows today to be first sign of upside leaderhip in nearly two months. Chart 4 gives a longer view of what appears to be a basing pattern extending back to last November. A close above the summer high at 58.31 would constitute an upside breakout.
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AMGEN GAINS 2%... Amgen was another big winner in the biotech group. The daily bars in Chart 5 show the biotech bellwether climbing to a two-month high as well. Its RS line is also rising. The weekly bars in Chart 6 paint a potentially bullish chart pattern for the stock. It has already exceeded a down trendline extending back to late 2005. It may be heading up to challenge overhead resistance in the 65-66 region. A close above that would be very bullish for the stock and probably for the group as a whole. Amgen is the biggest holding in both biotech ETFs. Its relative strength line (below chart) turned up last summer as stocks were rolling over and peaked in March as the market bottomed. The fact that it is starting to rise again suggests that traders may be turning a bit more defensive.
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GILEAD IS TRIANGULATING... Here's another big biotech stock that may be getting ready to try something on the upside. After hitting a record high in mid-2008, Gilead Sciences has been trending sideways in an apparent "symmetrical triangle". [The triangle is identified by two converging trendlines]. Since the trend prior to its formation was up, that makes it a potentially bullish pattern. A close over the upper trendline is needed, however, to turn its trend upward. Notice that its relative strength line (below chart) has been trending lower since March when the stock market turned higher. That makes this stock another potential candidate for some defensive money.
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OTHER BIOTECH STANDOUTS ... Although you probably won't read too much about the next three stocks, all are included in the top ten holdings of the two ETFs and are showing strong chart patterns. Alexion and Vertex Pharmaceuticals are both trading at 52 week highs and in clear uptrends. Chart 10 shows Illumina climbing above 40 for the first time in a year. If you're looking for some place to put some money, but are concerned about the market being somewhat over-extended, some of the these biotech stocks may be worth a look.
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