Market Goes Down, Biotech and Healthcare Lead the Way

The market opened higher Thursday, but, started to slide in late morning. Biotechs were particularly weak: OSIP -8.29%; GENZ -6.43%; CELG -5.1%. Health care stocks were even worse: HUM -19.48%; AET -11.26%; CI -8.54%.

Thursday’s big drop in these two sectors came as more details in Obama’s proposed budget were revealed. Private insurance plans and drug manufacturers are among the companies that will be facing cuts. Some people were “surprised” by today’s big downturn in the biotechs and health care. But, these sectors did not just drop Thursday. Most of them started sliding two weeks ago. President Obama has made it very clear that health care reform is among the top issues that the new administration will focus on.

For instance, let’s take a look at IBB, the Nasdaq Biotechnology Index (This will further review some of the points that we talked about 2 days ago on ESI and GS):

click to enlarge

IBB (3-month Daily Chart)

1. IBB recently peaked on 2/9 and started sliding.
2. On 2/17, the chart showed a “bearish” crossover in the MACD
3. On 2/23, the 10-day MA (the “red” curve) crossed below the 20-day MA (the “cyan” curve). As you might remember, when this happens, the bullish formation is dissolved.

What followed was couple of days of sideways fluctuation; then, a big downturn, falling off the cliff. If you read the article from 2 days ago on ESI, check out what happened to ESI Thursday. It went as low as $103.51 from Wednesday’s close of $117.29.

Let’s take HUM, a health care stock:

HUM (3-month Daily Chart)

Similar development here. On 2/23, the 10-day MA curved lower and crossed below the 20-day MA. The volume was particularly high. Two days of fluctuation followed. Then, it dropped precipitously Thursday.

Thus, the charts had showed more than a week ago that these stocks were getting weaker. 3 days ago, the charts started to show high probability of these stocks falling much lower. There are much fundamentals hidden in the charts. This is because people who trade the stocks start to push the stocks a certain way “before” the big move finally happens. People who purposefully push the stock a certain direction often know something fundamental about those stocks. So, when you see something “particular” happening on the charts, especially when the volume is high, you should take note and suspect that something “big” is about to happen. You can then take the time to do some research to find the fundamental facts that may support the move that you’re seeing on the charts. Like I’ve said, in a volatile environment such as the one that we are in, “Fundamentals are important, and technical analysis in indispensable“.

Good day and HappyTrading! ™.

Disclosure: no positions

Comments

[jimmy Turano:]

Andy Wang, Good article"Market Goes Down, Biotech and Healthcare Lead the Way".
Maybe you can give some insight on 'MRNA' one day.
They have had several news announcements lately, but the stock price has been anemic for half dozen months now. Is it due to the fact that they are in tremendous debt, or low earnings, or high burn rate? Or is it all three Vital signs that puts this company in Critical Condition? Please give your prospective when you can.

Feb 27 07:45 AM

[ScroogeMcduck:]

CAN ANYONE TELL ME WHY CELG IS AT A 52 WEEK LOW?

Feb 27 09:49 AM

[MyHappyTrad...:]

MRNA
has a strong resistance at $0.5. It's not going anywhere unless it breaks that resistance.


On Feb 27 07:45 AM jimmy Turano wrote:

> Andy Wang, Good article"Market Goes Down, Biotech and Healthcare
> Lead the Way".
> Maybe you can give some insight on 'MRNA' one day.
> They have had several news announcements lately, but the stock price
> has been anemic for half dozen months now. Is it due to the fact
> that they are in tremendous debt, or low earnings, or high burn rate?
> Or is it all three Vital signs that puts this company in Critical
> Condition? Please give your prospective when you can.

Feb 27 11:30 AM

[MyHappyTrad...:]

CELG
looks REALLY weak. $47.5 was the support; just went below today (Friday 2/27).

Feb 27 11:32 AM

[jimmy Turano:]

MDRNA INC(MRNA) ANNOUNCEMENT OF DE-LISTING THIS PAST WEEKEND! (03/06/09)
ANOTHER NAIL IN THE COFFIN!
READ ON THE INTERNET DE-LISTING STATUS
(ONE GOOD THING, THEY WON'T BE ABLE TO BORROW ANY MORE MONEY TO ADD TO THEIR HUGE DEBT)
FOR FURTHER INFO, CHECK PREDICTWALLSTREET,TOPI... SOCIAL PICKS, AND EARNINGSWHISPERS RE:'MRNA'

Mar 09 08:57 AM

[jimmy Turano:]

STRONG RESISTANCE AT $.50 CENTS?
YOU BETTER LOWER THE BAR A LITTLE AFTER TODAYS YEAR END EARNINGS REPORT SCHEDULED AFTER THE MARKET CLOSES.
IT CLOSED AT $.24 CENTS YESTERDAY, MARCH 16TH
WITH NO IMPROVED EARNINGS IN SIGHT AND THEIR HIGH BURN RATE, THE WEIGHT OF DEBT AND EXPENSES WILL
BE THEIR DEMISE WITHIN 12 MONTHS!


On Feb 27 11:30 AM Andy Wang wrote:

> MRNA
> has a strong resistance at $0.5. It's not going anywhere unless
> it breaks that resistance.

Mar 17 09:01 AM