The fallen growth stocks are some of the biggest winners on today’s move higher in the broader market. Internet, biotech, and solar stocks are all outperforming. I wrote about the three sector etfs for these sectors in a Macro Wrap 3 weeks ago, included below.
Since that post, the social media sector has continued its severe beating, exacerbated by TWTR’s post-lockup spill last week. SOCL remains in a steep downtrend, even with today’s bounce, though more important resistance near the declining 50 day ma, around $19.35, is still a good bit higher:
The biotech sector has held up better overall over the course of the selloff. IBB has closed below its 200 day moving average on only a few days, and has bounced comfortably above it today, though the falling 50 day ma is now only 3% away:
Finally, the solar sector has held up better than the rest, holding above its 200 day moving average throughout the selling:
The 200 day moving average is now around $37.75, and that will be a crucial level to watch for support in the coming weeks. TAN’s declining 50 day moving average is now around $43.75.
The relative weakness of the social media sector likely implies more severe problems for investors in those stocks in the coming months. Among the high fliers, the solar sector is a better place to look for potential outperformance in the intermediate term, while the biotech sector is in more of a no man’s land for the multi-month outlook.
Macro Wrap – Has the Momentum Storm Passed, IBB, SOCL, TAN
April 22, 2014
Momentum has stabilized in the past week as the broader market has bounced. The chart of the S&P 500 index still looks much healthier than many of the momo leaders of the past year, but at the least, they’ve stopped tumbling in an avalanche of distress, as was the case just one week ago. At this point, how severe is the damage on the charts of some of the sector leaders ?
Pharmaceutical stocks are the talk of the morning after a couple large deals (Novartis – Glaxo Cancer, Valeant – Allergan). None of those names are in the biotech sector, but the biotech etf IBB is indicated higher this morning on the back of the health care optimism. IBB needs to get above $235.25 to make a higher high, and a move above the 100 day moving average, now around $239.50, would be an all-clear signal:
Without breaking those levels on the upside, IBB remains in a downtrend of lower lows and lower highs.
Solar stocks are another sector that got hit hard in the past 6 weeks, though the solar etf TAN did not break its 200 day moving average. Dan made a very nice profit on the TAN put trade that he took off last week near TAN’s 200 day ma:
The solar sector has held up better than most other momentum leaders. TAN did not break its early February low of $36.39, and held above its rising 200 day ma as well. However, the trend of lower highs and lower lows remains in place unless TAN can break above the $43.75 level, which is also near its 50 day moving average, now around $44.40.
Finally, the social media sector has been one of the worst-performing groups in the past 6 weeks, and the chart of the social media etf SOCL shows much more damage than IBB or TAN. SOCL broke its 200 day ma, and also made a new 6 month low on the recent selling:
However, SOCL has rallied strongly in the last week, and is nearing its April 10th high of $19.32. A move above that would break the short-term downtrend, though the longer-term break below the 200 day moving average (now around $19.60) will likely take much more time to heal.
Several large caps in these sectors report earnings this week, such as GILD, BIIB, CELG, and FB. I’ll be watching whether the sector ETFs can break the short-term downtrends that are currently still in place even with the bounce over the past week.