Pharmaceutical stocks were a standout in November. The big global names had an exceptional month. While they are categorized as defensive stocks, these heavyweights have very powerful biotechnology investments. The pharmaceutical stocks listed below all hit new highs within November. While the $SPX was up about 2% for the month, all of lifting to get positive for the month happened over the last three to five days. The stocks listed below have way more exciting charts than the $SPX!
The biggest loser on this list is Amarin but one look at the chart tells an entirely different story. Over the last 50 trading days the stock went from $3 to $23 and pulled back in November to $17. For technicians, there was no entry at $3 as the stocks was grinding sideways for over a year with no gains and tripled overnight to open at $10. Now that the stock has consolidated, risk can be defined and a technical entry can be placed on the stock. That's the worst stock according to this list, but obviously the stock may have a lot more promise ahead.
There is only one stock on the list that has an SCTR ranking below 70 so this is a broad industry move of strength. Investors migrating into the safety of big defensive names after the drubbing in October suggests the rotation was very successful. Only the last three names on this list didn't outperform the $SPX even though they hit new highs sometime in November.
Using the SCTR breadth suggests there is lots of strength in this group. As I mentioned, there are a lot of nice charts in the group but Shire has a weekly full stochastic rolling over below 80 which is not usually a good trait so that stock would be an avoid for me. It may work out, but why fight it when we have nice chart shapes like GSK?
Look at the stock indicators for GlaxoSmithKline. You can see for most of this year, the SCTR rank has been above 40 and most of the time around 70. That is very strong on a stock paying a big fat dividend of 5% based on Friday's close. The relative strength compared to the $SPX just hit new 12 month highs. The most beautiful information on the chart is the stock closed almost on it's high on a weekend and a month end. Every long term investor will find that signal. The full stochastic just broke above 80 so that is very positive but could suggest the stock is extended. If you look at the PPO, momentum is just turning up while above zero which is a bullish trait, and we can see the PPO crossed its signal line this week. The indicator looks like it reset back to the zero line and is now preparing for the next advance. For breakout buyers these are all very good signals as a group. A stop below this weeks low will give the stock some room to wiggle.
Spend a little time looking through these pharmaceutical names. I think there are quite a few gems on the list.
Here is last week's broad market review video.
A funny story from Thanksgiving weekend. My daughter was at the library signing out books. She looked to see if the City Of Calgary library had ordered any of my books. Well, the good news was they had five in inventory, but they were all signed out and a waiting list! That's fun for me to hear!
If you are looking for a small gift, you might have family or friends that would like to learn more about the basics of charting. The first section of the book walks through all the chart settings to get the charts you want. The second section is why you might use charts for investing and the third section is putting it all together.
Click here to buy your copy today! Stock Charts For Dummies.
The Final Bar video shows three simple scans users can work through to help find strong stocks off the lows.
The Canadian Technician video shows the secondary bounce off the late October lows in Canada.
If you are missing intermarket signals in the market, follow me on Twitter and check out my Vimeo Channel often. Bookmark it for easy access!
Good trading,
Greg Schnell, CMT, MFTA
Senior Technical Analyst, StockCharts.com
Author, Stock Charts for Dummies
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