Update-2 1/30 a Mid-day trading- Bearish pattern emerging
- Many of our indicators have turned bearish: XBI down 1.8% under $90, red screen in mid-caps, large caps at lows for the day, IWM at day lows etc.
- Fears about coronavirus causing buyers strike?
- Risk-off, even positive earnings don’t help tape as investors look ahead;ILMN down over 3%.
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Update-1…Coronavirus Related Sell-Off Adds to Market Uncertainty
This is a good day for a portfolio review to see downside risks but also upside opportunity. My healthcare stocks that are up today as of the 1/27 close:
Long– Abbvie (ABBV), Becton-Dickinson (BDX),Gilead Sciences (GILD), Genmark Diagnosics (GNMK), Hologic (HOLX), Johnson and Johnson (JNJ) and Moderna (MRNA).
- Related information-Moderna is employing its messenger iRNA technology to activate the immune system against specific viruses.No Phase 3 trials have begun.
- Small cap movers today on coronavirus : BCRX, INO, NOVX, VIR.
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Biotech Sector Watch: Week ending 1/25/20
A Sell-Off on Profit Taking?
It was only a modest one week drop of 1% in the S&P-500 but investors seemed to be shocked that the run ebbed. The reason for the loss of momentum is not yet clear but ostensibly it was concerns about coronavirus in China.Up until now it has been all about the FED and 10 year Treasury yields lower than 2%. A slew of earnings reports over the next week will help clarify the market picture along with economic data on new home sales and personal income. Q-4 GDP estimates come on Thursday as well as AMGN and BIIB earnings.
As we mentioned in our Biotech Investing Strategy on 1/21 we thought it would be better to hold off on new trades until earnings reports provided more clarity on the market direction.The healthcare sector was unusually weak with DJ stocks down 2.82% and the broader XLV down 1.8% to $102.46 But Biotech ETFS were hit harder with the equal weight more speculative XBI down 5% and the large cap weighted IBB down 3.6%. The NASDAQ-100 QQQ held up much better for the week slightly down.
Tech Continues to Outperform Biotech
The sell-off might be rationalized after nice gains in 2019 and beginning in 2020 with the QQQs up about 36% for one year and the XBI up over 20% to the $98 level now down to $90.75. So with the loss of momentum and earnings data rolling technicals are important. Large cap Amgen (AMGN) was off 6% last week prior to earnings this week so that should be interesting.Merck (MRK) also took a 4.6% hit over five days but still up 17.9 % over one year.
More speculative mid and small caps were hit even harder over the past week. One concern I have is the weakness in the Russell-2000 (IWM), down for the year 2020 at $163 support at $160.
The question that might be answered over the next two weeks is whether large cap earnings and revenue will show lower growth for the biotech sector. I will re-balance my portfolio and add select mid-cap growth stocks early in the week.