HEALTHCARE SPDR SHOWS RELATIVE STRENGTH AND HAS POSITIVE CHART PATTERN -- WATERS NEARS UPSIDE BREAKOUT -- PATTERSON DENTAL TURNS UP -- BIOGEN IS BIOTECH LEADER -- BIG PHARMA LEADERS ARE JOHNSON & JOHNSON, BRISTOL MYERS SQUIBB, AND PFIZER
HEALTH CARE SPDR SHOWS RELATIVE STRENGTH ... With stocks encountering some selling at the start of June, healthcare stocks are showing more resilience. That may be due to the fact the heathcare stocks have defensive characteristics. It may also have to do with the fact that healthcare stocks are starting to do better after a year of relative underperformance. And the sector has a nice looking chart pattern. Chart 1 shows the Health Care SPDR (XLV) having recently bounced off its moving average lines. Its 50-day average has risen over its 200-day. And the XLV found recent support at the falling trendine drawn over its August/December highs. That's a good example of a resistance line turning into a support line. The XLV/SPX ratio (top of chart) shows how badly the XLV underperformed from last August to October, and again between January and March. The XLV has been showing new relative strength over the last two months. It was also the second strongest sector during May (behind technology and ahead of financials).
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Chart 1
WATERS NEARS UPSIDE BREAKOUT... Back on April 18 when the Healthcare SPDR first climbed over its 200-day line, I showed a number of medical equipment stocks that were that sector's strongest group. Chart 2 shows the Dow Jones US Medical Equipment Index ($DJUSAM) trading near a record high. One of the stocks included in that message was Waters Corp (WAT) which hit a new record in April. Chart 3 shows the stock moving up to re-challenge its April high. Other stocks shown in the earlier message that have already hit new highs include Boston Scientific (BSX), Thermo Fisher Scientific (TMO), and Zimmer Biomet Holdings (ZBH).
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Chart 2
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Chart 3
PATTERSON DENTAL LEADS MEDICAL SUPPLIES... Chart 4 shows the Dow Jones US Medical Supplies Index ($DJUSMS) hitting a new record high. That was actually the strongest healthcare group during the month of May. One of that group's standout performers is Patterson Dental (PDCO). Chart 5 shows that healthcare leader surging during May to the highest level since last August. Its relative strength line (top of chart) also turned up.
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Chart 4
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Chart 5
BIOGEN IS BIOTECH LEADER... Biotech stocks are also contributing to the healthcare rally. Chart 6 shows the Nasdaq Biotechnology iShares (IBB) moving up toward its April high and its 200-day average. The chart pattern since February suggests bottoming action. Daily MACD lines (below chart) show an impressive "positive divergence" during May which is supportive of higher prices. The IBB, however, has to clear its April high and 200-day line to confirm that a bottom has been formed. Biogen has already done that. Chart 7 shows Biogen (BIIB) trading above its April high and 200-day average. That's an encouraging sign for it and the rest of the biotech group.
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Chart 6
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Chart 7
BIG PHARMA MAY ALSO BE BOTTOMING... Chart 8 shows the VanEck Vectors Pharmaceutical ETF (PPH) also attempting to form a bottom. It's daily MACD lines seem to suggest that. The PPH, however, still needs to clear its April high and 200-day line to turn its current trend from sideways to higher. The good news is that the group has stopped going down. That's usually the first requirement in a potential bottoming formation. The PPH is somewhat deceiving though. Several of its big pharma stocks show much stronger chart patterns. Johnson & Johnson (JNJ), for example, is the biggest holding in the PPH. Chart 9, however, shows that stock trading at new record. Some other big pharma leaders also have strong chart patterns.
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Chart 8
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Chart 9
BRISTOL MYERS SQUIBB AND PFIZER ALSO LOOK STRONG... The daily bars in Chart 10 show Bristol Myers Squibb (BMY) in a small consolidation pattern after exceeding its December high in late April. That fact that the stock is finding support near its April peak is a good sign. Chart 11 shows Pfizer (PFE) climbing closer to its 2015 highs. Pharmaceuticals are the biggest part of the Healthcare SPDR (38%). The ability of three of the largest stocks in the big pharma group to show such strong trends is a positive sign for that group and the entire healthcare sector.
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Chart 10
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Chart 11
ABBVIE IS A BIOTECH LEADER... One of the stronger biotech stocks shown in my April 18 healthcare message is updated here. Chart 12 shows AbbVie (ABBV) in the process of challenging its fourth quarter high. The stock cleared its 200-day average in mid-April when I first showed it. Its 50-day line has also exceeded its 200-day which is a bullish sign. Its relative strength line (top of chart) has been rising since last October. ABBV is one of the larger holdings in the Healthcare SPDR.
