The Great Biotech Massacre As The Ghost of Drug Pricing Past Return

Strange price action today all around the market place, and very tough to understand, even for a seasoned guy like myself. 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 what has changed beside nothing? Well, nothing. This is a political thing that gets thrown around every four years and draws lots of headlines, but nothing changes it would seem. Remember it was in 2015 that Hillary Clinton started the great biotech sell-off when she first mentioned drug pricing.

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. Through in Medicare for all talk and well you get the big sell-off. Let this chart below show you how much damage could be done just on worries.

xbi, biotech

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.

russell, iwm

Netflix (NFLXWealth Strength IndexAAPL is Extremely Up and trending Up)

Netflix 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. Netflix: Likely Sand Bagged 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.

My biggest fear is that this Netflix subscriber stuff and pending “competition” narrative starts to sound like the Tesla Model 3 drama.  Because honestly, I won’t make it. I won’t be able to handle the mountains out of mole holes the media will make out of it. I can’t.

From the looks, it may be heading that way.  Let hope for the sake of our sanity; it doesn’t.

netflix, nflx

Apple

It looks like Apple broke out today. I mentioned in my ST room yesterday that it had looked there was bullish flag forming.

apple, aapl

Cisco (CSCOWealth Strength IndexAAPL is Extremely Up and trending Up)

Today I wrote an article on why I thought Cisco might rise to price not seen in 20 years to around $62.  Cisco’s Stock May Reach Prices Not Seen In 20 Years

cisco, csco

Citigroup (C)

Citigroup continues to rise as well and looks to be heading towards $73.

citigroup, c

Eli Lilly (LLY)

Lilly continues to struggle, and a break below $115 sends the stock back to $104.

lilly,

-Mike

This article first appeared on Mott Capital.

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