Biotech Bubbling:
Healthcare overall is still in the 2019 doghouse. The sector cellar dweller is still the worst performer on a YTD basis, yet still higher in the 5% neighborhood. Below is the chart of the XBI and it shows some technical strength as Monday registered a bullish reversal off rising 50 day SMA, although the line still swims below its 200 day SMA. The positives are that it is holding its recent bullish ascending triangle breakout, and has filled in a gap successfully. However we know breakouts are normally retested before they can resume their hopeful advance. This one has been tested twice now, and another could prove fatal.
Providers Peril:
Healthcare is a very diverse space and most of the attention is dedicated to biotech and pharma names. The devices continue to register nice advances with the IHI just 2% off most recent 52 week highs. One section of the group that does not garner much thought are the healthcare providers. There are just a couple ETFs dedicated to them, and below is the chart of the IHF. It trades on average less than 100K shares a day, but it gives a good illustration of what is happening with individual names. Two of the top five largest holdings in the fund, CVS and CI are deep into bear market territory lower by 34 and 28% from most recent 52 week highs respectively.
Examples:
Spinoffs are often a good way for parent companies to unlock shareholder value, and is giver the newly formed company some autonomy to have a singular, narrow minded focus. Below is the chart of ELAN, a good example of a recent spinoff and how it was presented in our 3/19 Healthcare Report. A series of lower lows since last September, obviously not the best time to start trading on your own, was halted earlier in March. It seems to becoming more comfortable above its 50 day SMA, which has flatlined, and this name deserves to be on investors radar with the new found strength.