There was strange price action yesterday. Health care and small-cap stocks were rocked, with the XBI biotech index falling a stunning 4.7%. Meanwhile, the Russell fell 0.92%. The type of decline in the biotech group would have made you think the NASDAQ was down big, but it was flat on the day.
Biotech Massacre
It seems like everyone is freaking out again over drug pricing. This is at the very least a 4-year-old story, and nothing has changed. Whether drug pricing changes actually happen is up in the air, but the fear that investors have is very much real, as demonstrated by the market’s reaction. Let this chart below show you how much damage could be done just on worries.
Can biotech’s and healthcare stocks fall further, sure. I suspect that will settle down at some point. The chart above shows that RSI is has trended lower for a long time, and there are signs of trying to reverse that trend. As long as the XBI can hold $85, and that uptrend in the RSI remains intact, this will merely be a short-term pullback. If that trend in the RSI breaks, and XBI falls below $82, it could get gruesome.
Russell (RUT)
The Russell fell hard today too, but it was encouraging to see it hold support at 1,565. As long as that holds, I think the Russell is ok also.
Netflix (NFLX)
Netflix (NASDAQ:NFLX) gave back its morning gains to finish the day down $5, not a big deal. I don’t see anything wrong with this company, and after doing some further work today, I think the second quarter may prove to be better than guidance.
The chart is a mess, and I can’t make heads or tails of it anymore. For now, I will stick with my view of the stock rising to $380.
Apple (AAPL)
It looks like Apple (NASDAQ:AAPL) broke out today. I mentioned in my ST room yesterday that it had looked there was bullish flag forming.
Cisco (CSCO)
Today I wrote an article on why I thought Cisco (NASDAQ:CSCO) might rise to price not seen in 20 years to around $62.
Citigroup (C)
Citigroup Inc (NYSE:C) continues to rise as well and looks to be heading towards $73.
Eli Lilly (LLY)
Eli Lilly and Company (NYSE:LLY) continues to struggle, and a break below $115 sends the stock back to $104.
