A flat performance by the Dow Jones Industrial Average masked a real bloodletting in top stocks in the health care and pharmaceutical sectors. But stocks today also revealed some important sector rotation — the lifeblood of long-running bull markets.
XThirteen of the day's worst 14 industry groups among the 197 tracked by IBD all came from the gigantic medical sector. An increased interest on Capitol Hill in paving the way for a single-payer universal health care system is unleashing a torrent of selling in small-, mid- and large-cap firms.
In contrast, media, banking and internet content stocks led the upside. Transportation stocks also attracted fresh institutional money. The Dow Jones transportation average rallied 1% as more railroads padded their gains following bullish breakouts.
At 10,935, the Dow transports raised their year-to-date gain to 19.4%.
The Dow Jones Industrial Average closed with a loss of 3 points to 26,449 amid rebounds by its banking components JPMorgan Chase (JPM) and Goldman Sachs (GS), each up 3 points or more. Goldman is challenging resistance at its 200-day moving average for the second time in four sessions.
The S&P 500 reversed for a mild loss of 0.2%. The Nasdaq composite fell less than 0.1%. Small caps underperformed. The Russell 2000 slipped 0.9%.
The Nasdaq 100 hit an all-time high of 7715 before pulling back to cut that gain to around 0.4%.
Volume came in higher on both major exchanges, according to early data.
These Medical Stocks Trigger Sell Signals
Masimo (MASI) nose-dived more than 7% and took out its 50-day moving average in heavy trade, a key sell signal. Volume raced 134% above its 50-day average to 926,000 shares, the highest since Feb. 27. The patient monitoring systems expert has a market value of $6.5 billion.
Intuitive Surgical (ISRG) slid 6% and it too crashed through its 50-day line. The robotic surgery systems pioneer is now testing institutional buying support at its long-term 200-day moving average. It reports earning Thursday.
Vertex Pharmaceuticals (VRTX), the leader in cystic fibrosis treatments, dropped more than 7% in fast turnover and gouged its 200-day moving average. That negative action also triggers a defense-type sell signal.
Veeva Systems (VEEV), part of the IBD Sector Leaders premier stock list, slipped nearly 3% yet is showing less damage. Shares are still trading comfortably above the key 50-day and 10-week lines.
IBD weekly charts draw the 10-week moving average in red. Top stocks tend to lead their 10-week lines higher, especially after breaking out from a well-formed base.
But the expert in business, compliance and clinical trials management software for Big Pharma and biotech firms has made an outstanding run since it cleared a 101.49 buy point in a base that features elements of a good double bottom base. The gain has reached as high as 35%. It makes sense to sell at least some shares and take profits on the way up.
This Dow Jones Stock Is Gaining More Post-Breakout Traction
Fellow Dow Jones component Apple (AAPL) continued to make progress on its breakout from a new first-stage base, a cup with handle that offers a 197.79 buy point. At 203, the iPhone and digital services titan holds a 2.6% gain and thus remains within the 5% buy zone.
Walt Disney (DIS) added to its robust gains last week following a blockbuster debut of its new streaming video service, Disney+. The stock rose 1.4% to 131.76 and has now rallied more than 9% past a 120.30 entry in a saucer pattern.
Don't Ignore This New Hot Sector In The Stock Market
Money flowed into transportation stocks, particularly railroads, even amid rising oil prices.
Canadian National Railway (CNI) rolled to a sixth straight gain, rising more than 1% to 93.51. The stock is still in the 5% buy zone, rising nearly 4.5% past an 89.48 proper buy point in a cup with handle.
Read more on CN in this New Highs story.
Please follow Chung on Twitter at both @SaitoChung and @IBD_DChung for more on growth stocks, breakouts, sell rules and financial markets.
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