Biotechnology Stocks Hits New Highs After A Choppy 60 Days

Biotechnology stocks eked out small gains today taking the liquid $4.4B  market cap ETF (IBB) to new highs at $225 up 5.58% for the week and 5.94% for the month of November.The $1B market cap ETF (XBI $130.49) also did well making a comeback up  4.66% for the month after hitting a low of $114 on November 7. The sector showed good accumulation of stocks anticipating the seasonal December/January rally. Large caps propelled the sector on November 2 with both Biogen Idec (BIIB) and Gilead (GILD) breaking out on good news.

Today Array (ARRY $5.72) and Alexion ALXN $124.50)  were big movers on volume with no news found. Check them out on Monday. Alkermes (ALKS $40.38) one of our core picks also is close to all time high of $41.

We added Vertex Pharmaceuticals (VRTX (69.42) to our focus list on November 15 at a price of $62.84. Vertex is a large cap ($16B) laggard with a focus on small molecule drugs for hepatitis C virus (HCV) and cystic fibrosis. HCV competition in the  market with new oral drugs from Gilead (GILD) and JNJ was perceived to be negative for Vertex. But VRTX stock had a strong technical rebound of the $60 level signaling that the selling was overdone. Downgrades near the bottom of the technical pattern on October 30 also gave a buying clue as the stock approached a “value” level.

Although bubble talk is picking up, the froth and speculation is more concentrated in mid to small caps that are more volatile and susceptible to bad news and momentum shifts. Take a look at high fliers like : AEGR, ARIA, CLDX, INFI and SRPT and you’ll  know what I mean. Unless you are a full time trader of biotech stocks, stick with well known large caps, ETFs and funds.


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