Update-3 XLV up from bottom at $86 to $88.63. IBB holding but more choppy at $107 level.

Update-2  12p EDT-IBB flattish at $106 as earnings on large caps come in-will be reviewed at end of week.

XLV holding at $87.66.

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Update-1…4/23/19 pm– Healthcare and Biotech  Stocks Rallied Off Monday’s Bottom

NASDAQ up 1.32%, S&P up 0.88%

A 1-2% rally in all major ETFs on a “green screen” day:

  • XLV up 1.58%, XBI up 2.84%, IBB up 2.11%, XHE up 1.9%.
  • Perception was that political agenda for “Medicare for all” was not a near term risk.
  • Technicals still call the stock trends; mid-caps and gene therapy are big winners.
  • Upcoming earnings will call the fundamentals and guidance for 2019.

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Biotech Wreck Is Sobering For Bulls

Political Impact Of Drug Pricing Could Be Lasting Through 2020

Long Term Trends Intact demographics and M&A

Biotech was collateral damage from the surprising and sudden realization that the politics of drug pricing is here to stay and healthcare will be a 2020 Election issue. The clues to this Biotech Wreck prior to Q1 earnings were given on 4/10 by technicals with choppy action in March. The early April uptrend of the XBI to  new 2019 highs at the $93 level turned out to be unsustainable and this makes recovery much harder because of the technical damage in Q4 2018. But on Friday we saw a little buying come in so next week might be a good time to do some trades. And because healthcare providers were at the inception of the sell-off we can start with a small buy on the XLV Healthcare Select SPDR now at $85.92 .The XLV has a 6.88% position in a leading insurer United Health (UNH) but has big positions in leading biopharma and medtech companies such as JNJ, PFE MDT, MRK and ABBV. UNH stock got thrashed last week despite an EPS that jumped 24% in the last quarterly.

If you are underweight healthcare in your portfolio adding some XLV could be timely or after earnings next week. Here is a large cap biopharma review in Raygent from January 2016 after a severe correction when the IBB was crushed down 9%! The IBB subsequently hit a 3 yr. low on 2/1/16 near the $80 level. The high for the IBB was mid-July 2015 at around $130 a level we have not seen over the past 5 yrs.

For a pure play on providers the iShares U.S. Healthcare Providers ETF (IHF) perked up 1.9% on Friday but still down 6.7% for the week.

Scoreboard from last week:

  • XLV down 5.3%, XBI down 5.4%, IBB down 5.%, FBT down 7.7%, QQQ up 0.6%.

Here are some trading themes going forward especially with a big earnings week coming up.

  • Technicals: The XBI is a good indicator of risk appetite so it needs to hold 2019 support at the current $82-$84 level. We favor the XBI only for bulls and traders because of equal weighting including small and mid-cap stocks that would respond to top line growth, clinical news and M&A. Events drive biotech stocks more than fundamentals. The IBB at the $104 level looks much worst technically because it has given up 3 months of gains and will need good guidance and earnings over the next two weeks. Keep in mind that healthcare  over the past few months is among the worse sectors and yet we have not had a major market correction in 2019. But since the XLV has large cap defensive growth companies  as well as insurers it should be less volatile than pure biotech ETFs.

  • Stock Pickers Market: It has been a stock pickers market given that sector plays like ETFs and mutual funds are tough to buy in a downtrend. We had several good picks in 2018 and 2019: AMRN FMI GNMK  RHHBY TSRO. The break in biopharma stocks favors traders because volatility is increasing so it may be more difficult for ETFs to rebalance. Look for life science and biopharma stocks that are holding up well in what is slowly becoming a bear market. Here are some trading ideas within biotech:
  • Gene Therapy stocks are still strong with more data emerging from the clinic- BOLD, MGTX. Just this week an unknown gene therapy stock, Mustang Bio (MBIO) soared from 3 to 5.64++ on a “bubble boy” commercial deal with St.Jude’s Children’s Hospital.
  • Mid Cap-ARRY, BMRN.
  • Diagnostics and Tools: genomics and molecular diagnostics: DHR, GNMK, ILMN TMO; Small cap growth AMRN.

The market last week favored technology, consumer goods and industrials over healthcare stocks. Micro-cap speculative stocks were on a tear just 2 weeks ago so let’s see if risk appetite comes back. The IWM recently hit a double top so we need an improvement in the technicals at the $156 level to energize the bulls.

We have changed our format slightly focusing on individual stocks in the news and trends in the industry.  There is a plethora of good free and paid content for biotech  investors focusing on details of technology and Company profiles that would be difficult to emulate so better to offer timely pulses and trading ideas. We also mentioned setting up portfolios of stocks on Yahoo which would then give you technical trends and fundamentals on the Company. And of course we offer on this site the potential to review historical prices and trends from article going back through 2009 in our Archives.

Disclosure long: ABBV, AMRN, BMY, CRSP, GNMK, IJR, ILMN, MGTX, RHHBY.

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