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What’s happening to XLV is the same thing, I’ve seen happen to 100’s of other Grade A companies.
A company decides to issue a profit warning, and the market immediately takes it into a very Low RSI reading.
It takes weeks for a company to come back up from a very low RSI reading.
Here’s a headline from Bloomberg--
“The proposed budget would also raise rebates that drugmakers must provide for patients on Medicaid, the nation’s health plan for the poor, to 22 percent of the manufacturer’s price from 15 percent. Lilly and AstraZeneca Plc said they would lose “several hundred million” dollars each in sales.”
This headline indicates to me, that the market will have a hard time determining the impact Obama’s plan will have on the XLV sector.
In the meantime, I can play XLV’s historical $2.2 to $3 price channel, until the market determines which way the health plan is going to go. This may take a long time. The longer it takes, the better it is for me. It means I will have more opportunities to make some money.
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Here's my take on GENZ. It had really good looking EPS fundamentals going forward, until the healthcare reform changed the XLV's outlook.
TRADING RECORD
