Update-2 December 3 .. .Our Top Pick TSRO is up 58% on GSK Buyout

We recommended Tesaro (TSRO) at $34 and it paid off today with a ~$5.1B buyout by GlaxoSmith Kline!

Year End Rally Intact with XBI up over 3% to $84 handle,


Update-1 December 1… NASDAQ Rallies 0.79% on Nov 30

  • Our recent trade picks did well last week: AMGN up 8%,XBI up 3.5%,TSRO up 8.4%
  • Large caps took off on Friday: ABBV up 4.85%, CELG up 2.94%, GILD up 3.23%; we reluctantly bought CELG at $71 for ASH Meeting Action.
  • Mid-Caps got greener: AGIO up 3.31%, ARRY up 2.31%,IMMU up 6%,NKTR up 2.8%
  • American Society of Hematology Meeting next week with stocks to watch: Abbvie (ABBV), Amgen (AMGN), bluebird bio (BLUE) and Celgene (CELG) and many other smaller caps BGNE,KPTI, SGEN. From the stock action we saw last week this Meeting will be impactful in biotech.
  • Leerink Partners provides extensive proprietary analyst coverage of this meeting.


Trading the Biotech Bottom: Technicals Holding for the Second Week

Need Relief from High Risk Macro Factors: Brexit-FED-Trade

Markets Can Bounce from an Oversold Condition with Help from a Retail Rebound

This week’s rally action showed that trading the biotech bottom can be profitable if there is a general market bounce but we still have the FED and the G-20+ Meeting and a “China wild card” ahead this week. Maybe with clarification on upcoming tariff policies against China in January we can make headway as Kudlow “talked the talk” today. Until then we remain mired in macro muddiness and ambivalent trends. Or worse we have a tweeting POTUS who riles the markets with strong opinions and attacks on Corporate actions like General Motors today.

Technicals held the bottom over the past month based on the following charts:

  • The XBI was flat to $77.97 above the $74.93 low of 11/14 but still down 10.6% YTD.
  • The IJR is trading the bottom at $77.22 with lackluster momentum up 1.1% over one month.
  • Breadth in mid-cap stocks are a good indicator of momentum and sentiment but today they were weak after a strong tape yesterday.
  • Large caps should do well in an evolving value oriented market with the IBB flat today but up 2% over a rocky period and following leaders: AMGN MRK VRTX

Recent news and trades:

  • The FDA approved the first ever TRK inhibitor Vitraki (larotrectinib) for patients with advanced solid tumors and harboring rare mutation NTRK Gene Fusion (1,2).However Loxo Oncology(LOXO) stock sold off on the good news down 9% to $139 . The stock hit a closing high of $192 on July 6 the peak of the biotech bull market.
  • We recommended (in a second round) Amgen (AMGN) for conservative investors at $192 and Tesaro (TSRO) for aggressive traders at $35 earlier this month.
  • The Healthcare Sector has done well over the latest risk-off month of down action but valuations look good and demographics are favorable. The XLV in the $91 range is up 9% YTD.

Biotech action was mixed today with many losers among the mid-caps, but TSRO was up 3.35% and SGEN up 1.68%; large caps fared much better with a green screen and many 1%+ winners: ABBV ALXN AMGN BIIB CELG ! VRTX . If you really like bottom fishing then Celgene (CELG) is your play at $69 off the recent bottom of $67.

Despite a recovery in the major indices today the tape for mid and small cap biotechs was painted very red, a reversal from yesterday. Given the risk for the “China wild card” and potentially more tariffs coming it’s a day-by-day trade.

Disclosure: long ABBV AMGN FBIOX GILD MRK RHHBY XBI and several smaller caps.

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