Today we will be looking at the Pharmaceutical sector. It has been about a year since the last time we looked at this sector so we wanted to update our position on it. The Amex Pharmaceutical Index has been most flat for the last year and actually down just slightly, while the major indexes have done much better during the same period.

You are probably already familiar with at least a few of the companies that make up the Amex Pharmaceutical Index. It includes several big names that you hear about in the news often and we probably have all used their products. Some of these companies are Merck (MRK), Pfizer (PFE), Amgen (AMGN), Eli Lilly (LLY), and Abbott Laboratories (ABT).

You can see in the chart that we have provided that the price of the index has been jumping around a lot for the last year and the last few weeks have shown a strong pullback. It has just recently crossed under its 200-day exponential moving average line (green line), which has most often been an indication in the past that a reversal was coming soon. The index is also deeply in the oversold area on the Williams %R indicator (bottom of the chart), this has also been a good indication of a reversal in the past. We think that the index will reach 337 at least but if it drops below 318, it may be making another move like it did in October of last year.

If you want to invest in Pharmaceuticals, there is a Pharmaceutical HOLDRs exchange traded fund (PPH) that is similar to the Amex Pharmaceutical Index. Of the companies that we mentioned above, Amgen (AMGN), and Merck (MRK) outperformed the Amex Pharmaceutical Index, while Pfizer (PFE), Eli Lilly (LLY), and Abbott Laboratories (ABT) underperformed the index. You can probably also find plenty of mutual funds that invest in Pharmaceutical companies as well.

Price Headley is the founder and chief analyst of BigTrends.com.