Update-2… Broad Tradable Rally Continues 12:30 PM EST

XBI leads IBB today up 4.2% vs 2.9%. XBI at $54 is now up 9.55% over 5 days and well off Feb. 11 bottom of $44. This is a broad rally today with most biotech stocks up  and the most speculative stocks are big movers. Check your holdings for laggards and sell them because everything should be up even the mid-caps: INCY, SGEN etc. Most of our latest picks are movers: BLUE,BMY, GILD.

Update-1 Green Screen

Stealth Rally at 11:15am EST…NASDAQ up 0.45% to 4729

Energy and materials lead market. Short squeeze? Stronger than expected February jobs report brings in buyers.

A volatile rally is kicking in especially with smaller cap biotechs. The XBI is up 1.99%. Watch XBI for small cap momentum.

Selected small cap movers: BLUE up 5.7%, FCSC up 3.8%,GLYC up 15%.RXDX up 5.44%

Mid cap movers: AGIO up 4.6%,JUNO up 6.48%,KITE up 3.47%,MDVN up 6.2%, SGEN up 4%


Biotech Stocks Lag and Remain Stuck in a Trading Range

IBB at $268 up 1%   NASDAQ up 0.23% at 4703    S&P up 0.41% at 1986

Biotech stocks are trying to rally after a scary downdraft Monday when the IBB dropped more than 2%. Over five days the IBB is up 2.4% compared to 4.13% for the NASDAQ-100 (QQQ). However the IBB is still one of the worse sectors YTD down over 20%, when even the trashed energy sector XLE  is down only 1.38% after today’s move up. Energy and materials led the market today up over 2%.According to some pundits and analysts biotechnology and healthcare stocks are still under political assault for pricing issues and that may be cause for caution especially when other sectors are moving up.

We are in the process for reviewing our Life Science Portfolios and recommended several new buys on February 3 since the severe correction which began in mid-January. Here is the performance of those stocks as well as Bristol-Myers Squibb (BMY) which was recommended on 2/16.

Stock     Ticker         Recommended Price        % Performance   

Abbvie (ABBV) $56.49     Now $55.70                                (1.4)

bluebird bio (BLUE) $43.75    Now $53.86                      23.1

Bristol-Myers Squibb (BMY) $61    Now $64.90                6.4

Gilead Sciences (GILD) $85.80    Now $88.80                  3.5

BLUE is a speculative and volatile stock in gene therapy, gene editing and CAR-T and has a partnership with Celgene (CELG). The other three stocks pay dividends.

In addition we suggested that investors buy large cap biopharmaceuticals for the long term and avoid smaller caps unless they are  frequent traders. XBI would also be  a good short term trading vehicle for more volatile small caps. Trading has been lively with 10% moves over 3 days quite common as these stocks are near their lows.

Many of the favored large cap biopharmaceutical stocks are still struggling YTD including some of our original picks: ALXN down 21% , AMGN down 9.7%, BIIB down 11.5%, CELG down 13%,REGN down 24% and  RHHBY down 6.8%. Stocks in bold are beating the IBB and the Fidelity Select Biotechnology Portfolio (FBIOX).

  • The February 11 bottom of $244 for the IBB is holding. The XBI bottom likewise at $44 but still down 25.5% YTD.
  • We reviewed large cap biopharma valuation metrics on 1/31/16 and will continue to track these for potential new buys.
  • Look for upside trends in four mid-cap bellwether stocks which have been crushed since August 2015: Alnylam Pharmaceuticals (ALNY),Incyte Corp.(INCY), Intrexon (XON) Corp. and Seattle Genetics (SGEN).
  • Many of our previous small cap picks ran hard in Q4 2015, are extremely volatile but good trades. We will look for new buys among these stocks.
  • Technicals: we need to break through $270 on the IBB and $52 on the XBI for a few days to confirm a bullish short term trading trend (SMA 20).

The healthcare sector is currently out of favor and biotech lags other sectors like energy, technology (XLK) and consumer staples (XLP) up 1.9% YTD are leading. However traders can make money in speculative stocks because of volatility. The damage to the sector was a result of bubble-like valuations up to early August 2015  peak then a severe downturn catalyzed by macro and drug pricing concerns.Positive trends in biopharma remain M&A, breakthrough technologies such as pharmaco-genomics and new products.

Disclosure: Long ABBV,BLUE,GILD.

IBB iShares Nasdaq Biotechnology daily Stock Chart

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