Biotech Stocks Take a 2+% Hit-Risk Off Again

Bull Market Intact But Expect Choppy Summer Tape

As of our previous portfolio review we are 15-20% cash and overweight large caps. The sell-off on July 31 hit all biotech stocks.However all major ETFs are up YTD with our recommended large cap weighted FBT up 17% YTD. The Rayno large cap biopharmaceutical portfolio of 8 stocks market weighted is up 13.8% YTD. We will remove Abbvie (ABBV) from the portfolio because of the potential inversion deal with Shire (SHPG) which would dilute the biotech product mix.

Biotech stocks were rallying toward late February highs as of July 3 but failed rallies twice and most indices (IBB, XBI) are now midway between April lows and February highs, but the FBT is only off 10% from 2014 highs. The smaller cap equal weighted XBI is the most volatile ETF and best for traders long or short. Our index of 50 small and mid cap biotechs traded more in-line with the XBI all red with many down 4-5% or more. Some surprising movers :

Alkermes( ALKS) down 7.69% misses on EPS

Aria (ARIA) down 5.88% on volume reversal from move up yesterday

Puma Biotech (PBYI) down only 1.23% after huge gap up last week

July 2014 Recap

NASDAQ Down 2% to 4370

S&P Down 2.16% to 1931.67

FBT (biotech ETF) down 3.64% to 81.11

IBB (biotech ETF) down 4.67% to 250.83

XBI (biotech ETF) down 6.69% to 46.20


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