Biotech Stocks Hit By Profit Taking-More Volatility Lies Ahead…Update-1

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buy Seroquel in mo Biotech players realized that news about China, energy and holiday shopping data do not affect their stocks. Our large cap biopharma portfolio went green helped by Biogen Idec (BIIB) up 6.43% on Phase 1a data for an Alzheimer Diseases drug! The AD drug got cleared for Phase 3 development. Alexion (ALXN) up 4.3% and Regeneron (REGN) up 3% made big moves for large caps. Our mid caps also rallied even Seattle Genetics (SGEN) up 3.9%. Rayno small caps followed the trend with CLDX, FCSC, FMI ,GLYC and KPTI all up.

In MOMO land even Agios Pharmaceuticals (AGIO) was up 1% despite the drop Monday.  Puma Biotechnology (PBYI) was up 4.9% to $225 but after hours the stock was down as much as 40 pts. after the Company announced a delay in plans for filing its breast cancer treatment. The NDA for PB272 will be postponed till Q1 2016 with a new indication. The PUMA drug is similar to Herceptin. The stock fell on November 13 also on disappointing Neratinib data in a study  combination study  with paclitaxel.

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High Flier Tech Stocks Take A Breather

NASDAQ Off 1.34% To 4727

Don’t blame the consumer and retail sales for the sell-off. Investors have done very well this year with simple indexing. The SPY SPDR S&P 500 is up 11.4% YTD, the FBT First Trust Biotechnology Index is up 45.7% YTD and the XLK SPDR Technology Index is up 17.5% YTD. Who needs stock picking when you can cruise with indexing. So what does the AAPL and biotech selloff have to do with retail sales, Black Friday and Cyber Monday? Nothing. Many consumers did their shopping earlier in the week and there are plenty of shopping days left in the year. But coasting through your gains in the market may be over and more volatility lies ahead. MACRO issues will continue to arise and a shakeout from the energy market downturn could effect the global economy.

Look at my post on November 14 when all biotech stocks had a bad day. Also off October lows we had a “V-shaped” upside move more that 20% off the lows, a pretty volatile month. Last Friday a low volume day we saw blow-off moves in some MoMo stocks like Agios Pharmaceuticals (AGIO) down 4.5% today to $96.3 but hitting highs of  $111.60 2 trading days ago. AGIO is up 302% YTD buoyed by support from major biotech specialty institutions and a Celegene (CELG) investment. The market cap is around $3.5B despite a pipeline of only 3 Phase 1 drugs in clinical development. AGIOS lead products are focused in hematologic malignancies with core capabilities in cellular metabolism with the IDH1 and IDH2 mutant inhibitors.

Today the biotech screen is again a solid red although several of our large caps picks were in the green: AMGN, BIIB, GILD and RHBBY. Within the Rayno mid-cap motif Seattle Genetics (SGEN) is down again and down almost 10% YTD. PCYC and VRTX were also down. Small caps are extremely volatile even on relatively low volume: Celldex (CLDX) down 4.5% and GlycoMimetics (GLYC) down 13,3% after hitting highs of $9.50 last week. Another early stage speculative stock Epizyme, Inc. (EPZM) was down 8.18% today to $21 on average volume wiping out gains for the year.

Here is our portfolio summary and a trading model through January 2015:

  1. Large caps on our focus list are favored or an ETF like FBT and GILD.
  2. The market will be more volatile in the coming months but seasonality favors bullish moves.
  3. Small caps are for traders only with 5-10% daily moves more common. The IWM peaked on November 26. Our 5 focus small cap picks peaked last month but CLDX, GLYC and KPTI are still in the money.
  4. Valuations for mid-caps don’t matter. $3-5B market caps may be hard to fathom but specialty funds need to buy stocks as money flows are positive. Moreover the healthcare sector is up 25% YTD (XLV) and that supports biotech valuations.
  5. A portfolio or ETF approach is favored. Trading individual stocks is for the pros.

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