Today was all about the collapse in the biotechs, which means
so much else was ignored. I am not bullish on the biotechs,
but that's because I am not a fan of stocks at highs after a
big run; I just do not like to chase momentum. You will see
Gilead Sciences (GILD) is discussed below and last week
we discussed Biogen Idec (BIIB) and Celgene
(CELG). I was not a fan of any of them but I did not envision
As bad as IBB was, it hasn't broken a thing yet. There is a
good deal of support between $285 and $290 so being that
tomorrow would be day three if it gets down there, I'd look
for a short-term snapback rally.
But that doesn't mean I like the biotechs. There is nothing
compelling in the charts for me to think they can do much more
than snap back. Either they will have a short-term rally and
then break down or they will just go sideways to build a new
base. After witnessing the collapse in oil and then trying to
catch a falling knife in a group that was over-owned and over-
loved, I have no interest in doing it. Any break of $285 and
you complete a top in this chart.
The related group that got little or no coverage was the drugs
or healthcare. The Health Care Select Sector SPDR ETF
(XLV) has a lower high but has not yet broken that $67 low.
This group has been where a lot of the big-cap dividend-paying
money has gone. Any breakdown here and the next target is down
near $63. This chart looks toppy to me but until or unless it
breaks $67, it can still be saved.
Then there was the massive move in bonds. The yield on the
five-year note is back to where it was in early October,
albeit there was a higher yield on it in September. If we look
at a chart of iShares 20+ Year Treasury Bond (TLT) we
see it has not broken the uptrend line but it did take out
last week's lows. If this cannot bounce off $122, it changes
the dynamics in the bond market since it has been nothing but
lower rates and higher prices in 2014, especially in the last
Aside from these individual moves, nothing much changed
statistically in the market. I still believe we should have a
pullback (Nasdaq already pulled back today) and then
rally one more time into the new year. Then we'll assess where
the indicators stand as we get overbought.
Since my next newsletter will be Monday evening, I want to
wish everyone a Merry Christmas. For those who celebrate, may
your holidays be merry and bright!
You can see some down and out garbage is starting to lift its
head. Last week we had EGHT and tonight I offer up
Coupons.com (COUP). I must admit I didn't know any
stocks still called themselves dotcoms anymore, but that is a
base and should measure toward $20, keeping in mind there is a
minor gap around $19. Below $16 and I'd be gone.
The McClellan Summation Index has turned back up, though the
increase has been rather pathetic considering the rally. One
harsh down day and this will falter and turn right back down.
Helene welcomes your questions about Top Stocks and her
charting strategy and techniques. Please send an email
directly to Helene with your questions. However, please
remember that TheStreet.com Top Stocks is not intended to
provide personalized investment advice.
Email Helene here.
Campbell Soup Co. (CPB) is stuck in a trading range and
I am trying to decide if it is going to break out to the
upside. For now, I am undecided because unlike so many other
defensive names, this one has lagged, thus I'll call it a
trading range. Should it trade as I have drawn in, I would be
more interested in the chart from the long side.
Sonoco Products (SON) has broken out but it is also
quite stretched now. I'd prefer to see some milling around and
backing and filling, retesting the $44 area. As long as the
stock can stay above $42 I believe it has a decent chance at
making its way up to the $48 to $50 area. Let me note the one
thing that bothers me: that breakout in June (at 44) that
simply collapsed without retesting the high. Thus, I do not
want to see this break back below $42.
When we last checked on Gilead I had thought it could rally
but there was a retest of that spike low in October still to
come. It has obviously collapsed. The first thing to note is
that we should use a three-day rule if trying to catch a
bottom: It should start to find its footing and attempt a
rally on or just after day three. In the bigger picture,
however, it broke down from a diamond top, which is bearish.
The target is near $80. I suspect there will be a lot of
bottom-fishing in GILD in the next week or two, but any rally
near $100 and I'd be pleased to get out.
We are not short-term overbought yet.
We are not yet short-term overbought, but we are at resistance.
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