Trading Model for SMID Biotech Stocks is Still Bullish
- Core position for a biotech portfolio remains large cap biopharmaceuticals including funds such as FBIOX up 2.1% YTD.
- We have developed parameters to track “risk on or risk off” trading windows with the XBI up 5.77%.
- Objective is to select longer term winners among SMID cap biotechs.
We posted an update of our trading model for SMID biotech stocks in mid -January after the JPMorgan Healthcare Conference.We provided a list of SMID stocks that could help determine if the biotech sector remained attractive for trading for investors. Keep in mind that the biotech sector is relatively small in the context of TECHNOLOGY including AI and other large sectors of the S&P 500 like the Financials (XLF). AS of 4/4/26 the leading sectors of the S&P 500 YTD are: Energy up 31.89%, Materials 11.27%, Utilities up 8% and Industrials up 6%. Healthcare reimains down 4.7%. The big stories that affected these sectors are the War with Iran and AI.
Our favored sectors within healthcare are biotech and SMID caps. If the Russell 2000 (IWM) does not have momentum the SMID cap biotechs will lack an important group of generalist investors . Here is the YTD performance of the important parameters of SMID performance: IWM $251 up 1.4%, IBB $169 up 0.39%, XBI $129 up 5.77%, ARKG $27.36 down 5.6%. All ETFs are low compared to the pace of 2025 but we need to see Q1 2026 earnings to confirm our a bullish call.
If we look at important mid caps listed in the MID January post the bull market is intact but selected momentum high fliers are down: ADPT, EYPT, GH, TEM, VCYT. Volatility can be very high in SMID biotech so be wary of parabolic moves and drops in the RSI.
But the XBI is up and the IBB is flat despite a market correction where the QQQ is down 4.77% at $585 and the IWM is flat. Some of the big winners on our trading list in 2026 YTD are: ABOS up 28%, CBIO up 63.6%, DNTH up108%, PTGX up 8.82%,SLDB up 32.8 , TWST up 61.85%, TXG up 36.9%, XENE up 28.8%.
We added Arcus Biosciences (RCUS) to our trading list with a BUY at $22.5. Market cap $2.88B, P/Cash 2.93, P/S 11.65 ,RSI 56.82.Arcus Biosciences, Inc., a clinical-stage biopharmaceutical company, develops and commercializes cancer therapies in the United States.
