While the healthcare sector lost traction over the last month as the broader market consolidates, the last week has seen health care once again become a market leader as the S&P 500 moves back toward all time highs. The Health Care Select Sector SPDR (ARCA:XLV) is up 2.79% over the last week, with a large push coming from the biotechnology industry, up 6.12% over the same period. The health care sector has been very strong over the last six months, so with the recent pullback and renewed signs of strength, especially in biotech, there are a number of great opportunities to keep an eye on.

AbbVie (NYSE:ABBV) is forming a potential range, having respected a support area between $46.50 and $45.50 twice in 2014. The first bounce off the area produced a rally to $54.73. The bounce in November could produce a similar result, so the target area for long trades is between $54 and $55. A strong break above $55 is a longer-term bullish signal, while a strong drop below $45 is longer-term bearish. Any pullbacks that stay stay above $45.50, followed by push higher are buying opportunities, with stop loss below $45.50.

AbbVie (NYSE:ABBV) is forming a potential range, having respected a support area between $46.50 and $45.50 twice in 2014.

Biogen Idec (Nasdaq:BIIB) gave up all its 2014 gains in March and early April, but the price found strong support at the January low and has risen substantially off of it. The price bounced off support between $272 to $270 in April signaling the longer-term uptrend could still be in tact. The break above a short-term downward channel also indicates short to medium term pressure is up, as the price attempts to reclaim the $350+ region. Stops on longs can be placed below $270, and then trailed up as new swing lows form. Initial targets are between $350 and $355, as there is likely to significant resistance in that area. A strong break above $360 keeps the long-term uptrend alive.

Biogen Idec (Nasdaq:BIIB) gave up all its 2014 gains in March and early April, but the price found strong support at the January low and has risen substantially off of it.

Illumina (Nasdaq:ILMN) also gave back most of its 2014 gains in March and early April, but found support at a former gap from January. After closing most of the gap, the price has rallied $20, and is close to breaking a short-term trend line. If the price moves above $150, then the recent low ($127.69) is likely to hold, so any pullbacks that stay above that level are buying opportunities. Place a stop below $127.69. The target is between $178 and $179. A strong rally beyond $183.30 keeps the longer-term uptrend in tack, while a drop below $127 indicates another down wave is underway.

Illumina (Nasdaq:ILMN) also gave back most of its 2014 gains in March and early April, but found support at a former gap from January.

Vertex Pharmaceuticals (Nasdaq:VRTX) has respected support between $60 and $58 for a second time. The price bounced aggressively off the area back in November, and then proceeded to run to resistance between $85.50 and $87.75. With the bounce off the same area in April the stock may be forming a large channel, providing a target in the $85 region with a stop below $60. A significant break above $90 provides a long-term bullish signal, while a drop below $58 is longer-term bearish. The potential range is the play right now. A rise above $70.25 followed by a pullback that stays above $60 indicates a range low is likely in place, and the price will continue back toward the $85 area.

Vertex Pharmaceuticals (Nasdaq:VRTX) has respected support between $60 and $58 for second time.

The Bottom Line

Health care is moving well again, and the biotech space has a lot to do with that. These biotech stocks have all seen big pullbacks recently, but given strong bounces off support, those pullbacks may present good buying opportunities. Utilize stops and targets to control risk and capitalize on current price structures. Whether the longer-term uptrends will continue in these stocks is unknown, therefore taking profits near former resistance could prove wise. Hold a portion of the position to lock in more profit if you believe the price will break to new highs. Biotechnology can be a volatile industry, therefore only trade if you are comfortable with uncertain risk (due to gapping prices). Keep position size(s) small relative to account size, so that a single loss doesn't significantly draw down your capital.

Related Articles
  1. Chart Advisor

    ChartAdvisor for April 18 2014

    Weekly technical summary of the major U.S. indices.
  2. Chart Advisor

    ChartAdvisor for April 11 2014

    Weekly technical summary of the major U.S. indices.
  3. Chart Advisor

    ChartAdvisor for April 4 2014

    A technical summary of the major U.S. indices.
  4. Chart Advisor

    ChartAdvisor for March 27 2014

    Technical summary of the major U.S. indices.
  5. Chart Advisor

    ChartAdvisor for March 21 2014

    A technical summary of the major U.S. indices.
  6. Chart Advisor

    ChartAdvisor for March 13 2014

    Summary of the major U.S. indices.
  7. Forex Strategies

    Two Great Currencies To Profit From Oil Volatility

    U.S. dollar crosses with Canadian and Australian dollars offer easy access to crude oil trends due to their tight correlation with energy futures.
  8. Investing

    Redefining the Stop-Loss

    Using Stop-losses for trading doesn’t mean ‘losing money’, but instead think about the money you'll start saving once you learn how they work.
  9. Mutual Funds & ETFs

    ETF Analysis: ALPS Medical Breakthroughs

    Learn more about a unique and innovative exchange-traded fund (ETF) in the biotechnology industry: the ALPS Medical Breakthroughs Fund.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Healthcare

    Learn about the iShares U.S. Healthcare exchange-traded fund, which invests in a wide range of health care providers, hospitals and home care facilities.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  3. Indicator

    Indicators are statistics used to measure current conditions ...
  4. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Sucker Yield

    When an investor has essentially risked all of his capital for ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  3. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  4. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!