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Market Recap for Monday, July 2, 2018

A brief recap from yesterday:

All of our major indices climbed higher with renewed leadership from the NASDAQ and Russell 2000.  Technology (XLK, +0.89%) and utilities (XLU, +0.71%) led the action, while energy (XLE, -1.47%) was very weak.  Given the jump in crude oil prices this morning, though, I'd expect to see the XLE make another run at short-term price resistance at 77.


Gambling stocks ($DJUSCA, -6.03%) held back the consumer discretionary sector (XLY, +0.14%) after Macau reported disappointing revenues.  Wynn Resorts (WYNN), Melco Resorts & Entertainment (MLCO) and Las Vegas Sands (LVS) were crushed as a result as the DJUSCA fell to its lowest level of 2018 and closed below its 50 week SMA for the first time in more than two years:

Channel lines can be somewhat subjective as far as which lines to connect and exactly at what angle.  Still, a break below price support near 890 would confirm what appears to be a channel break.  Also, watch the weekly PPO, which is now nearing centerline support, and the weekly RSI, which has dipped beneath 40.  During uptrends, the weekly PPO and RSI typically remain above the zero line and 40, respectively.

Pre-Market Action

The 10 year treasury yield ($TNX) is beginning to creep higher, rising one basis point to 2.88% this morning.  Crude oil ($WTIC) is more than 1% higher as it nears $75 per barrel.  We're seeing a big rise in German shares ($DAX) with the DAX up by 1.43% at last check.

Dow Jones futures are strong, up 134 points with roughly 30 minutes left to the opening bell.

Current Outlook

The Dow Jones Transportation Average ($TRAN) has held key price support at 10000 so far and is also bouncing off 50 week SMA support:

The uptrend in transports is fairly clear and the group appears to be consolidating.  While consolidations like the one above (possible symmetrical triangle?) can be very frustrating because short-term gains are not sustainable, they do tend to break in the direction of the prior trend, which is higher in this case.  I continue to favor both railroads ($DJUSRR) and truckers ($DJUSTK).

Sector/Industry Watch

The Dow Jones U.S. Biotechnology Index ($DJUSBT) has been among the best performing industry groups in July over the past two decades.  Last week, it seemed to have fallen apart technically, but has since recovered, closing yesterday back above both its 20 day and 50 day moving averages:

While understanding and recognizing the bullish historical tendencies here, it's impossible to overlook the technical hurdles that lie ahead.  If the DJUSBT is to follow its historical form, it must negotiate resistance from 1980 (trendline) to 2010-2030 (price).

Historical Tendencies

Over the past 5 years, Amgen (AMGN) has gone up every year during July and averaged moving higher by 7.5%.  Can it get any better than that?  Well, AMGN over the past 20 years has moved higher 85% of  Julys and has averaged a 9.2% gain.  So, yes, it apparently can.

July 2018 update:  AMGN bounced off of 20 day EMA support yesterday and gained 0.38%.

Key Earnings Reports

None

Key Economic Reports

May factory orders to be released at 10:00am EST:  +0.0% (estimate)

Happy trading!

Tom

Tom Bowley
About the author: co-founded Invested Central and served as the site's Chief Market Strategist for more than 10 years. His unique trading style combines both his fundamental and technical strategies to systematically manage risk while trading. A regular contributor to StockCharts.com's bi-weekly ChartWatchers newsletter since 2006, Tom's role at StockCharts has expanded significantly since he joined the company as a full-time Senior Technical Analyst in March of 2015. Learn More
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