HEALTHCARE SECTOR IS LOOKING HEALTHIER -- BOSTON SCIENTIFIC, THERMO FISHER SCIENTIFIC, AND ZIMMER BIOMET HOLDINGS ARE MEDICAL EQUIPMENT LEADERS -- BIOTECH LEADERS ARE ABBVIE, AMGEN, AND GILEAD -- THE LAST TWO ARE TESTING MAJOR DOWN TRENDLINES
HEALTHCARE SPDR REACHES THREE-MONTH HIGH... Money is continuing to rotate into healthcare stocks which had been the year's weakest sector. It's been the market's strongest sector for the last two trading days. Chart 1 shows the HealthCare Sector SPDR (XLV) reaching the highest level in nearly three months and heading for a test of its 200-day moving average. Those gains are being propelled mainly by upturns in some biotech and pharma drug (which we'll look at shortly). Medical equipment stocks are actually the day's strongest healthcare group.
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Chart 1
MEDICAL EQUIPMENT LEADERS... In the medical equipment group, the following three leaders also have strong chart patterns. Chart 2 shows Boston Scientific (BSX) breaking out to the highest level in ten years. Its relative strength ratio (top of chart) is rising as well. Chart 3 shows Thermo Fisher Scientific (TMO) breaking out to a new record high. Its RS line is rising as well. Chart 4 shows Zimmer Biomet Holdings (ZBH) on the verge of breaking through chart resistance at its November high near 108. Its relative strength ratio (top of chart) bottomed in October and has been rising since then. Biotechs are right behind that group.
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Chart 2
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Chart 3
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Chart 4
ABBVIE, AMGEN, AND GILEAD ARE BIOTECH LEADERS... Chart 5 shows AbbVie (ABBV) moving up to challenge its 200-day average (red line) after clearing a falling resistance line. It formed two "rising bottoms" since last October which is another sign of strength. Friday's message showed Amgen (AMGN) trying to clear its 200-day average. It's doing that today, but may be on the verge of doing something more important. Chart 6 shows Amgen challenging a major resistance line drawn over its August/December highs. A decisive close above that blue line would be a very positive chart development. Amgen is one of the biggest stocks in the Biotech iShares ETF. Gilead Sciences (GILD) is the biggest. A couple of weeks ago I showed GILD starting to recover as an early sign that biotech stocks might be bottoming. The stock has risen to the highest level in nearly three months, and is still well below its 200-day line. Chart 7 shows, however, that Gilead is testing a falling resistance line extending back to last June. A decisive close above that blue line would be a strong sign that the stock's downtrend has ended. The fact that daily MACD line (below chart) have already exceeded their resistance line (blue circle) is a positive sign for the stock.
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Chart 5
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Chart 6
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Chart 7
MERCK CLEAR 200-DAY LINE... Pharmaceutical stocks are also starting to attract some attention. Merck may be one of the reasons why. Chart 8 shows Merck (MRK) trading back above its 200-day line for the first time since last August. It is approaching a test of its November intra-day high just below 55. A close above that chart barrier would be positive for the stock and the pharma group. Its relative strength line (top of chart) has been rising since last October. With major stock indexes nearing their fourth quarter highs, investors may be hedging their bets by starting to rotate some of their winnings into cheaper healthcare stocks, which are viewed as more defensive in nature.
