WaveStrength Trading Tactics for November 08, 2006
Early Democratic Ramifications
By Bryan Bottarelli
I said in this morning’s Radar the following:
“I can’t imagine that President Bush woke up in a good mood today. All things considered, it was a sweeping victory for the Democrats, as they took control of the House after 12 years of GOP rule.”
Later this afternoon, the President held a news conference and conceded (in true Texan form) that, “It was a thumpin.”
At the open of today’s trading, the Senate was still up for grabs, which resulted in an opening loss of about 50 points on the Dow. But once again, that loss was quickly absorbed, and with one hour left in the trading session, the Dow is now showing a 25-point gain. That’s certainly a good sign for the DIA calls we’re holding in WaveStrength Trader, not to mention our positions in The New York Times Company (NYT:NYSE) and Telecom HOLDRs (TTH:AMEX).
WaveStrength Traders: Hold for more gains!
What’s interesting today is how the market is reacting to the new Democratic majority. The big losers, for example, are the health insurers.
Names like WellPoint Inc. (WLP:NYSE), UnitedHealth Group Inc. (UNH:NYSE), and Molina Healthcare (MOH:NYSE) all dropped between 2.7% and 8% on the day, as investors fear that the days of steadily rising profits will quickly come to an end.
On the same hand, shares of Big Pharma stocks are also getting stung, as Pfizer Inc. (PFE:NYSE), Schering-Plough Corp. (SGP:NYSE), Abbott Laboratories (ABT:NYSE), Bristol-Myers Squibb Co. (BMY:NYSE), Johnson & Johnson (JNJ:NYSE), Wyeth (WYE:NYSE), and Eli Lilly and Co. (LLY:NYSE) are all down between 1.4% to 3.3% due to the Democrat’s platform of lowering prescription drug prices.
On the flipside, stem cell-related companies are experiencing nice boosts today. Shares of stem-cell specialists Aastrom Biosciences Inc. (ASTM:Nasdaq) is up 7.38%, StemCells Inc. (STEM:Nasdaq) is up 12.36% and Geron Corp. (GERN:Nasdaq) jumped 4.03%.
Looking ahead, I expect to see this bullish shift from Big Pharma to Biotech become more defined.
Case in point, the Biotech HOLDRs (BBH :AMEX), which is a collection of the top biotech companies on Wall Street, has turned an opening-session loss of $2.50 to a gain of $0.58 with less than one hour of trading left.