Nasdaq Healthcare shares
Eoin Treacy's view Healthcare
is a very broad theme which encompasses everything from relatively conservative
major caps, to strong dividend paying REITS and from highly speculative new
entrants to companies at the cutting edge of innovation. Fullermoney themes
such as the growth of the global middle class, the efficiencies that continue
to evolve as a result of technological invention and the increasing attractiveness
of reliable dividend paying shares are all represented in this sector.
I used the Chart Library's High/Lo Filter today to scan through the Nasdaq-100. It showed that 33 of the companies have made at least a new 3-month high in the last five days. Here are detailed instructions on how this might be achieved:
How do I use the Chart Library's Performance Filter?
The list is heavily skewed towards companies leveraged to the cloud computing sector but healthcare was another dominant theme.
Technology companies such Amazon, Juniper Networks, Citrix Systems and some others have become overextended relative to their 200-day MAs and appear to be in the process of unwinding at least part of their overbought conditions. (Also see Comment of the Day on January 6th)
Henry Schein encountered resistance in the region of the 2007 peak in April following a strong advance. It found support in the region of the 200-day MA from July and hit a new all time high this month. A sustained move below $60 would now be required to question medium-term upside potential.
Intuitive Surgical failed to sustain the break to new highs in April and pulled back to test the $250 area. It broke back above the 200-day MA two weeks ago and rallied impressively last week. A sustained move below $275 would now be required to question potential for some additional upside.
Hologic Inc bottomed in March 2009 and has sustained a progression of higher to equal reaction lows since. It is now testing the April high near $20 and, while somewhat overextended relative to the MA, a sustained move below $17 would be needed to check potential for a successful upward break.
Patterson Cos. Inc manufactures dental and veterinary equipment. It retested its "flash crash" low in September but has since rallied and is now retesting its April peak. A clear downward dynamic would be required to check momentum beyond a brief pause.
Pharmaceutical Product Development completed a first step above its base last week and is improving on that performance this week. A sustained move below $25 would be required to question its considerable recovery potential.
Vertex Pharmaceutical retested its 2006 and 2007 highs early last year before pull back to range above $30. It rallied impressively three weeks ago and a sustained move below $35 would be required to check potential for additional upside.
All of the above companies fall into a growth category. A more conservative option is the Worldwide Healthcare Investment Trust which is currently trading at discount to NAV of 6%. It holds a number of dividend aristocrats such as Johnson & Johnson, Novartis and Roche in its top-10 holdings. The trust encountered resistance near 700p from April 2010, found support in the region of the 200-day MA on a number of occasions since and hit a new high in December. A sustained move below the trend mean would be required to check scope for further upside.
Also see yesterday's piece on US Healthcare REITS.