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Thursday, April 11, 2013

Should you enter healthcare sector stocks now?

Like the FMCG sector, the healthcare sector is also considered a ‘defensive’ sector. What does ‘defensive’ sector mean? It means stocks from the sector usually don’t fall as much as the Sensex or Nifty during down trends. Nor do they rise as much as the Sensex or Nifty during up trends.

Is that good or bad? Well, let us say they provide more stability to your portfolio by being less volatile. The added advantage of owning healthcare sector stocks is that they don’t go in and out of fashion. If you are a diabetic or suffer from hypertension, you have to take a regular dose of medicines regardless of the state of the economy, or a change of government, or an increase in real-estate prices.

With the Sensex and Nifty under bear attacks, is this a good time to enter healthcare sector stocks? Yes, as long as you are selective. Not all stocks from the sector are performing well – as the 1 yr daily bar chart patterns of 10 stocks from the sector show.

Sanofi-Aventis

Sanofi-Aventis_Apr1113

After consolidating sideways with an upward bias for 10 of the past 12 months, the stock has broken out upwards. However, the stock trades in very low volumes, which causes large price swings and makes buying or selling a difficult proposition.

Glaxo Pharma

GlaxoPharma_Apr1113

The stock has been in a sideways consolidation for the past year. It is also prone to big price swings because it trades in low volumes. Investors holding such stocks usually treat them as family heirlooms and pass it on to future generations.

Novartis

Novartis_Apr1113

The stock had been consolidating sideways with a downward bias before dropping deeper into a bear market. The recent Supreme Court judgement against its patent application for a modified form of its popular cancer drug ‘Gleevec’ has been a setback.

Cadila

Cadila_Apr1113

The stock has been in a down trend since touching a peak in Sep ‘12, and has dropped into a bear market.

Dr. Reddy’s Lab

DrReddysLab_Apr1113

The stock is in a bull market, despite a sharp correction during Feb ‘13. It appears to have formed a bullish ‘double bottom’ pattern.

Ipca Labs

IpcaLabs_Apr1113

The stock has been in a steady up trend for the past 12 months. Periodic corrections below its 50 day EMA has helped it to move higher. This is what a bull market looks like on a chart.

Lupin

Lupin_Apr1113

This stock is also in a year-long up trend that has twice received support from its rising 200 day EMA.

Sun Pharma

SunPharma_Apr1113

Another stock that has been moving up in a bull market for the past year.

Opto Circuits

OptoCkt_Apr1113

Once a favourite of small investors, the stock has been in a down trend for the past 12 months, though it is showing some signs of a recovery. THis is what a bear market looks like on a chart.

Poly Medicure

PolyMedicure_Apr1113

The stock is in a bull market, but has been consolidating sideways for the past 5 months.

6 comments:

sumit said...

Great article sir ,i do want to invest some amount in above mention stocks should i pick up those trading in F&O or should go without this criteria am considering ipca,lupin & poly medicure.
secondly why auropharma not on list ???

Subhankar said...

Thanks, Sumit.

Choose stocks that are in up trends and trade in good volumes.

There are close to 100 listed stocks in the healthcare sector. Charts of only 10 were shown as a representative sample.

rk77 said...

Excellent analysis. Sun Pharma continues to rise but on very low volume. Does this indicate that little floating stock is available or that it has each end a peak and profit booking can be expected now?

Subhankar said...

Thanks Dr K.

Sun Pharma is a very good company and the stock has been an outperformer. It trades in very good volumes - not low volumes.

The stock is looking quite overbought after touching an all-time high, and may correct down to 850-875.

raj hiremath said...

Dear Subhankar ji,
Just happened to go through your comments & other other articles.I am consistently loosing money in Stock market,i do trading daily.Seek your advise.
Also would like to know if learning the chart is mandatory for making money in stock market or the patern to be followed.regards,
raj hiremath.09970063876
(rajeshrsh@rediffmail.com)

Subhankar said...

Hi Rajesh

Since your question is not relevant to the post, I'm responding directly to your email ID.