How to Trade the Stocks of Four Giants in the Health Care Industry

NEW YORK (TheStreet) -- Investors who own shares in one of the four widely held health care companies profiled here may want to consider the technical patterns of the stocks to help determine how to trade the shares to take advantage of their volatility.

The four stocks -- Amgen (AMGN), Gilead Sciences (GILD), Johnson & Johnson (JNJ) and Pfizer (PFE) -- are part of the Health Care Select Sector SPDR Fund (XLV) , which has gained 7.4% year to date, the best year-to-date performance among the 10 popular sectors.

The performances of large pharmaceutical and biotech-related companies can be quite different based upon news pending on potential blockbuster drugs in their pipelines. The following weekly charts and technical profiles may help investors manage the individual share-price volatility.

Here's the weekly chart for Amgen.


Courtesy of MetaStock Xenith

Amgen closed at $154.80 on Tuesday, down 2.8% year to date and 12% below its all-time intraday high of $173.60 set on April 22. The stock is below its 50-day and 200-day simple moving averages of $161.04 and $155.32, respectively. The weekly chart is negative with the stock below its key weekly moving average of $159.19.

Investors looking to buy Amgen should place a good-till-canceled limit order to purchase the stock if it drops to $109.19, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $161.01, which is a key level on technical charts until the end of June.

Here's the weekly chart for Gilead Sciences.


Courtesy of MetaStock Xenith

Gilead closed at $114.75 on Tuesday, up 22% year to date. Also on Tuesday, it set a 2015 high of $115.30. The stock is above its 50-day and 200-day simple moving averages of $105.86 and $103.90, respectively. The weekly chart is positive but overbought with the stock above its key weekly moving average of $109.58.

Investors looking to buy Gilead should place a good-till-canceled limit order to purchase the stock if it drops to $103.74, which is a key level on technical charts until the end of June.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $115.50, which is a key level on technical charts until the end of June.

Here's the weekly chart for Johnson & Johnson.


Courtesy of MetaStock Xenith

Johnson & Johnson closed at $98.21 on Tuesday, down 6.1% year to date. The stock set its all-time intraday high of $109.49 on Nov. 13. The shares are below their 50-day and 200-day simple moving averages of $100.54 and $103.06, respectively. The weekly chart is negative with the stock below its key weekly moving average of $100.05.

Investors looking to buy Johnson & Johnson should place a good-till-canceled limit order to purchase the stock if it drops to $87.14, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $112.48, which is a key level on technical charts until the end of June.

Here's the weekly chart for Pfizer.


Courtesy of MetaStock Xenith

Pfizer closed at $34.01 on Tuesday, up 9.2% year to date It set a multiyear intraday high of $35.53 on April 13. The stock is below its 50-day simple moving average of $34.44 and above its 200-day simple moving average of $32.16. The weekly chart is negative with the stock below its key weekly moving average of $34.27.

Investors looking to buy Pfizer should place a good-till-canceled limit order to purchase the stock if it drops to $33.24, which is a key level on technical charts until the end of June.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $36.14, which is a key level on technical charts until the end of June.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share-price direction.

Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the crash of 2008, and then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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