Blue-chip biotechs are awakening from their long slumber as the overhang of the health care debate finally passes toward history. It appears that most segments of the worldwide drug industry, from molecule to pill bottle, will survive well in the post-reform era, letting this unique corner of the market thrive once again.

These well-known companies have been underperforming their mid- and small-cap cousins since the market bottomed out in March 2009. That could change in coming months, with these stocks recapturing leadership from a more speculative group that includes Dendreon ( DNDN), Intermune ( ITMN) and Human Genome Sciences ( HGSI).

Amgen (AMGN) -- Weekly
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Amgen ( AMGN) became the world's largest publicly traded biotech last year when Roche bought Genentech. It topped out near $86 in 2005 after a long uptrend and dropped under $40 in 2008, where it bottomed ahead of the broad market. Progress since that time has been erratic, with price stuck in a massive trading range for the last two years.

The stock is now lifting toward range resistance in a relief rally triggered by the end of Washington's obsession with health care reform. Buying interest is perking up for the first time since July, and this uptick could mark the next phase in an eventual breakout and rally run into the mid-$70s.


Gilead (GILD) -- Daily
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Gilead Sciences ( GILD) is a current pick in my TSC newsletter, The Daily Swing Trade. It bottomed out near $35 in October 2008 and spiked into the low $50s a few months later. It then settled into the upper $40s, where it's been stuck for almost a year. The stock is moving higher after Sunday's vote and could finally break out.

A buying surge over $50 may trigger an uptrend that eventually tests the all-time high at $57.63, posted in August 2008. Looking back, this stock was one of the market's top performers for over a decade. Once the two-year high is cleared, it could resume its upward trajectory and reward long-term investors with excellent gains.


Celgene (CELG) -- Weekly
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Celgene ( CELG) is outperforming Amgen and Gilead because it's already broken out of a big trading range and headed toward a test of its all-time high near $76. But the long-term chart shows a double top at that level, which will be tough to break on the first attempt. As a result, the reward/risk profile isn't quite favorable for new entries.

The stock is now about halfway between support in the upper $50s and resistance in the mid-$70s. This is no-man's-land -- a downturn could yield substantial losses for new entries. As a result, I'd just stay on the sidelines and wait for a pullback. If that doesn't happen, move on and consider positions in other sector plays.


Biogen Idec (BIIB) -- Monthly
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Biogen Idec ( BIIB) makes perfect sense on the monthly chart. It hit $77 in 2001 following a vertical rally and dropped into a broad triangle pattern that's still in place nearly one decade later. Higher lows in 2002, 2005 and 2008 point to slow progress but the stock still hasn't rewarded long-term investors with a multiyear breakout and rally over $100.

Biogen Idec (BIIB) -- Weekly
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The weekly view shows a long basing pattern followed by a February breakout. But the stock faces a ton of overhead supply from the December 2007 and August 2008 selloffs. Despite these resistance levels, I expect Biogen to eventually find its way into the low $80s and try to break out of the 10-year pattern.


Genzyme (GENZ) -- Daily
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Finally, let's look at Genzyme ( GENZ), which is biotech's chronic underperformer. It broke 2006 support at $55 during the bear market and has struggled with this price level in the last year, crisscrossing it at least 25 times. The good news -- it looks like the stock has finally mounted this persistent barrier and is ready to head higher.

Although the current uptrend faces resistance at $63, the rally thrust off the 200-day moving average (green line) is bullish because that level had contained the upside for almost two years. As a result, I believe Genzyme will keep on moving higher, perhaps reaching the February 2009 swing high at $74 later this year.

Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.

Alan Farley is a private trader and publisher of Hard Right Edge, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of The Daily Swing Trade, a premium product from TheStreet.com that outlines his charts and analysis. Farley has also been featured in Barron's, SmartMoney, Tech Week, Active Trader, MoneyCentral, Technical Investor, Bridge Trader and Online Investor. He has written two books: The Master Swing Trader and The Master Swing Trader Toolkit: The Market Survival Guide, due out in April. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

Farley appreciates your feedback; click here to send him an email. Also, click here to sign up for Farley's premium subscription product, The Daily Swing Trade, brought to you exclusively by TheStreet.com.

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