3/1/24…Still plenty of good biotech trades around as XBI recovers over 3% to $101.53. Big movers today were: ABOS, CRMD, DNLI, GERN, IMTX, SUPN.
https://www.nasdaq.com/market-activity/etf/xbi/advanced-charting
2/29 at close ..MOmentum is easing with volatility making trading more difficult day to day.Here is what is happening among small cap biotech trades. There is a lot of red. ARKG sold off at $32 resistance.
- XBI is off highs and down 3.06% today to $98.42.
- NEW buy DNLI reversal down 2% to $19.78. Not good.
- QDEL is at a 3yr low if you have patience.
- SUPN sold off at $30 . NOT good
- ABOS, EVH, CPRX, CBRU, CRMD, GERN solid today.
- IBB down 1.85% to $136.84.
2/27 3p EST...XBI Momentum continues as small cap biotechs soar: ABOS, ARKG, CRBU, CRMD,CYRX, DNLI, RXRX, SUPN,TXG,TWST etc
We added Denali (DNLI) Therapeutics to our life science trading list at $22.
The XBI broke out today up 5.73% to $102.92.
2/26….3:45p EST…SMID Biotech Rally Led By XBI up 2.3%
Stocks Picks UP from our last update: ABOS, ARKG, CRBU, GERN, ILMN, PACB, SUPN,TWST, VCEL, VCYT.
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Life in the Slow Lane with Healthcare Stocks
- CORE: Healthcare playbook -diversification in with large caps in biopharma, devices and providers (UNH).
- AGGRESSIVE: Momentum trades with stock picking in SMID biotech and XBI, but small caps still lag.
- Technicals look more positive after 2023 earning reports, the US economy is strong but geopolitical risks remain.
Some analysts and pundits are calling the move in technology stocks an “AI bubble”. No need to review the performance for traders that NVDIA (NVDA) is up 59% YTD and 233% over one year, the XLK is up 6.66% YTD and 48% over 1 year; Advanced Micro (AMD) is up 19.75% YTD and 121% over 1 year.; and the QQQ is up 6.66% YTD and 47% over 1 year. But the AI theme is real and has its underpinnings in a new wave of computing that has already improved productivity in many companies and will require major upgrades to computer hardware and software platforms. Expect important benefits to healthcare data management and breakthroughs in drug discovery as well but maybe too soon to elucidate. Issue may be cost. So why be skeptical as the trend is ongoing backed up by revenues and dealmaking. Maybe it is a valuation bubble with certain companies and potential pitfalls for investors but let the trend be your friend.
BIOTECH already had its bubble in 2020-2021.
So back to the “slow lane ” of biotech trading and investing in healthcare stocks. If you have been following biotechs over the past ten years you’ll remember the recent biotech bubble of 2020-2021 when the pandemic drove many diagnostic and drug stocks to screeching heights as the market searched for solutions to COVID 19 infections. Vaccine and antiviral companies soared to huge multiples yet many products were successful and the overall result was positive. The lesson was to be keep bubbles in perspective a difficult thing to do even for successful companies like Pfizer (PFE) down over 50% over 2 years , Moderna (MRNA) cut from $400 to $96 and QuidelOrtho (QDEL) down over 200 pts from 2021 bubblicious highs (including merger with JNJ/Ortho)! So bubbles can cause a lot of disruption. I traded MRNA during this period and made a little money but it wasn’t obvious up or down at the time?
Biotech bubble peaked in Q1 2021. Charts showing 2020-2021 bubble.
Coincident to the pandemic you also had cheap money which enabled companies and investors to lose perspective and fund sectors and products that would be wracked by change and vlolatility. For example there is a story about over expansion of laboratory space in the biotech Mecca of Cambridge MA that shows the aftermath of misallocated capital. Similarly you had companies that used cheap capital for aggressive M&A for hyper growth and market share that now need to restructure.
XLV up 5.64% over one month, up 8.42% YTD. XBI up 0.19% over one month, up 6.11% YTD
So now that we see some positive trends in healthcare investing what’s the strategy and PLAYBOOK going forward?
- DEVELOP a core health care Porfolio with ETFs and Funds. XLV, FSMEX and PRHSX. If the market growth is intact then we need a core position in drugs and devices.
- Manage a core portfolio by trading individual stocks as you follow news and earnings reports but favoring large cap biopharma and medtech.
- Small caps (IWM) showed some nice moves in Q4 but have stalled in 2024 and did not participate in the recent AI rally.
- The IBB is worse up only 1.34% YTD and 1.72% YTD. So small caps trades are not so easy.