Over the weekend I shared my negative views of Gilead on Twitter. Now with the news floating about their Hep-C drugs, I want to elaborate as this may or may not be a great dip buying opportunity.
First the fundamental case I mentioned Saturday. Their hep-c lineup makes up 50% of sales and consumer reports ranks it as a top outrage in healthcare costs. The various pressures on pricing is there and will remain there.
There is a new crop of investors who see Gilead as a very cheap stock. The problem here is it's only cheap on a few metrics. The other issue is the performance of the biotech index. Biotech has soared in 2015 in climactic fashion. So much so that the group has become overvalued. When that happens, the stocks that look like bargains tend to be looking cheap for a reason - bad news ahead. A very cheap looking stock in a fully valued sector is fools gold.
Moving on to the technicals. There is a very attractive trading argument in this wedging price action, especially with the 200 day moving average so close by. That said, every other aspect of the chart is a cause for concern. Most notable is the lack of any institutional buyers since the earnings call gap down in early February. The only accumulation day since then was Friday, a day in which every large cap stock has unusual volume due to the 'triple witching' options expiration day.
The final consideration is the news. It seems like this sort-of known news is probably the best reason I can find to buy the stock.
Considering only the factors in the Gilead chart. I don't see how this is a buy the dip scenario, it really seems like Gilead has just been propped up by the biotech group. That said, a break over the Feb gap area after this shakeout would be a huge bullish tell. Time will tell.
Thanks for reading!
No comments:
Post a Comment