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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (11307)	4/17/1999 11:52:00 AM
From: Casaubon	Respond to of 99985

well, here's my first stab at sector analysis. I believe we are entering an early bear market. Evidence of this is the current sector rotation into energy an precious metals, which occurs at bull tops. Thus, anticipation of the next sector rotation would place interest in Consumer Non-Cyclicals: Stocks in consumer non-cyclicals (food) and consumer growth industries (cosmetics, tobacco, beverages) tend to experience fairly steady demand and are less sensitive to changes in the business cycle. These stocks typically attract investors when the economic cycle or bull market has matured, or is in the early stages of contraction. and, Health Care: In general, stocks in this sector move similarly to consumer non-cyclicals. This sector is considered defensive, meaning companies in this sector are generally unaffected by economic fluctuations. The Healthcare industry consists of Pharmaceutical firms, HMOs, Biotechnology firms and Medical Equipment suppliers. Pharmaceutical companies are affected by competitive market shares, the pace of FDA approvals, patent lives, and the strength of the R&D pipelines. Many Biotechnology firms are still in the development stage with their fortunes largely determined by investor perceptions of the relative merits of their R&D pipelines. With future new financing likely to be more difficult to obtain than in the past, strategic alliances between major drug companies and biotech firms are expected to increase. This supports investment in the BTK, which has just formed a doji candle pattern while tagging the lower bollinger band. Furthermore, the lower bolliger band has an upward bias (a bullish sign) while the upper BB is pinching down on the lower BB, implying this is a correction in the bull move. This chart was borrowed from L3, with thanks and gratitude! netnow.micron.net From an FA standpoint, the biotech industry is experiencing quicker turnaround time in both research and development due to many factors. Research has accelerated the drug approval process because basic understanding of cells and cell processes, on the molecular level, have improved dramatically this decade. This has led to more drugs entering clinical trials. Clinical trials have better designs and allow for quicker evaluations, of the worthiness, of the drug in the trial. It is better for drugs to fail early, as this will save biotech companies mucho dollars, in the long run. Better trials weed out poor candidates more quickly, resulting in fewer lost dollars. Also, the FDA has committed itself to reducing the turnaround time in the clinic, which has resulted in quicker drug approvals. This results in companies having better profitability, due to longer patent lives, for their drugs. Typically, a patent is issued before a drug enters the clinic. If that drug wallows through clinical trials, the patent life diminishes away like the time value premium of an option.