Bull Market Intact But Momentum Stocks Taking Hits

Most of you know the game. Buy stocks with headline news, new business models, increasing RSI and charts that scream momentum. Examples proliferate: Aegerion (AEGR), Celldex (CLDX), Netflix (NFLX), Tesla (TSLA), 3D Systems (DDD), etc. The broader bull market is intact with good earnings and dividends, FED support and ample cash for equity investing.Moreover the economic data is encouraging.Blue chip stocks are not overvalued and biotech stocks have real break-thoughs and new products. But riding the coat tails of the rising market is a whiff of 1999 with many cult stocks buoyed by fast money attitudes.

The momentum stock du jour is a newbie driven by speculators from $4 in July to $13 this week and now at $9.75 down 29.73% in one day on a volume of 29M shares! A triple bagger in six months. The whole interesting story is here on Seeking Alpha so I will not elaborate. Organovo (ONVO) is a “3D body printer” Company which as its business model proposes to 3D print functional human tissue for R&D purposes. So here we have a combination biotech cum 3D printing play! All we need to add is internet capability for a perfect stock idea.Or for today a perfect short.(Avoid the trade until stock shakes out).

More on momentum stocks at a later post but short and hedging opportunities are developing.

Here is a summary of our current investment strategy and picks:

  1. Avoid high flying biopharmaceutical mid and small caps with little or no revenue. Stay with large caps.
  2. All current Rayno Life Science portfolio picks remain as strong holds.
  3. New long trading ideas Dx and Tools: LMNX, NSPH,NSTG, VIVO
  4. New long trading ideas Rx: VRTX
  5. IBB ($209) technical support on downside is $200 then October bottom $194.
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