Gapping Gold Digger Drug Firms Eying Baby Boomers

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Just as with Japanese candlesticks, the placement of a “gap” in the price action on a chart is important to your analysis. Generally speaking, there are three main types of gaps: 1) Common gaps, which get filled rather quickly and punish short-term traders chasing the initial move, 2) Breakaway gaps, seen in a jump in price and volume out of an area of consolidation (I am merging “runaway gaps” in with breakaway gaps here), and 3) Exhaustion gaps, seen at the end of extended move, or a blow-off signaling an imminent reversal in trend. In trying to identify the nature of a gap, the key is avoiding confirmation bias when looking at the chart, and being as objective as you can about when and where the gap occurs.

Looking at the healthcare stocks, my main long position inside 12631 is BIIB, which I have held for roughly one week. Friday’s big move higher was accompanied by very strong buying volume, which has me looking at other large biotechnology and major drug firms. In particular, AZN and GSK, two major drug firms, are sporting gaps out of their respective areas of congestion. Note the price action in AZN and GSK on Friday was well above not only Thursday’s range, but above the ranges of the prior several months. Again, given the placement of these gaps, I think there is a good chance for them to be breakaway gaps out of consolidation.

To be sure, there has been much ballyhoo about why these dominant drug firms are “must-buys,” namely because of the aging baby boomer generation and their need for healthcare’s latest and tastiest treats. In the end, though, these stocks are only going to get going when they are good and ready, regardless of how many times a socially inept Wall Street analyst or portfolio manager goes on CNBC pumping the thesis.

I have also included the charts of AMGN CELG and GILD as long ideas in the sector, should you not feel up to chasing those potential breakaway gaps.

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7 Responses to “Gapping Gold Digger Drug Firms Eying Baby Boomers”

  1. Any video resource you can recommend to learn the basics of gaps? Thanks!

  2. Biib got a convenient boost from release of its detailed BG-12 data, perfectly coinciding with this gap. That drug will make a serious impact in the MS market.

  3. BTW, when you guys first purchased biib in 12631, I was wondering what was the stop you used and what price did you buy? I might have posed this question but can’t find the blog entry where I did. Thanks.

Comments are closed.

Gapping Gold Digger Drug Firms Eying Baby Boomers

__________________________

Just as with Japanese candlesticks, the placement of a “gap” in the price action on a chart is important to your analysis. Generally speaking, there are three main types of gaps: 1) Common gaps, which get filled rather quickly and punish short-term traders chasing the initial move, 2) Breakaway gaps, seen in a jump in price and volume out of an area of consolidation (I am merging “runaway gaps” in with breakaway gaps here), and 3) Exhaustion gaps, seen at the end of extended move, or a blow-off signaling an imminent reversal in trend. In trying to identify the nature of a gap, the key is avoiding confirmation bias when looking at the chart, and being as objective as you can about when and where the gap occurs.

Looking at the healthcare stocks, my main long position inside 12631 is BIIB, which I have held for roughly one week. Friday’s big move higher was accompanied by very strong buying volume, which has me looking at other large biotechnology and major drug firms. In particular, AZN and GSK, two major drug firms, are sporting gaps out of their respective areas of congestion. Note the price action in AZN and GSK on Friday was well above not only Thursday’s range, but above the ranges of the prior several months. Again, given the placement of these gaps, I think there is a good chance for them to be breakaway gaps out of consolidation.

To be sure, there has been much ballyhoo about why these dominant drug firms are “must-buys,” namely because of the aging baby boomer generation and their need for healthcare’s latest and tastiest treats. In the end, though, these stocks are only going to get going when they are good and ready, regardless of how many times a socially inept Wall Street analyst or portfolio manager goes on CNBC pumping the thesis.

I have also included the charts of AMGN CELG and GILD as long ideas in the sector, should you not feel up to chasing those potential breakaway gaps.

__________________________

__________________________

__________________________

__________________________

__________________________

__________________________

7 Responses to “Gapping Gold Digger Drug Firms Eying Baby Boomers”

  1. Any video resource you can recommend to learn the basics of gaps? Thanks!

  2. Biib got a convenient boost from release of its detailed BG-12 data, perfectly coinciding with this gap. That drug will make a serious impact in the MS market.

  3. BTW, when you guys first purchased biib in 12631, I was wondering what was the stop you used and what price did you buy? I might have posed this question but can’t find the blog entry where I did. Thanks.

Comments are closed.