Trading SMID Biotech Stocks in a Volatile Market…Update-2 7/6

Update- 7/6…The XBI model works as expected-if the XBI has momentum the chances are very good your SMID biotech stock will rally. The following stocks show gains or minimal losses over the past year. Stocks showing trading gains are : ADPT, CRSP, GERN, NTRA, RNA, TWST, VCEL.

Update-1 7/5…More of the same with record highs in NAZ up 1%,S&P 500 up 0.59%.Select SMID stocks still doing well: ADPT, GERN, NTRA, TWST, VCEL etc. XBI holding nicely at $91 though lacking momentum, up 2.84%YTD,  XLV at $144.41 up 6.68% YTD. Update tomorrow.  Large cap MEGA-TECH stocks and AAPL still rule.

• Trading SMID biotech stocks is difficult no matter what you know.
• Large cap biopharma with dividends should be the focus for non-traders e.g. ABBV, LLY REGN.
• Healthcare and smaller caps are lagging within the context of a broader market where technology rules.

We started this project about a year ago with the objective of finding long term winners and using MOMENTUM and technicals as a guide.Most of these companies have analyst coverage and adequate short term cash positions so you are not dealing with “penny stocks” given that the markets caps are at the $B+ level. But these stocks are extremely volatile given that they lack reliable earnings metrics hence are speculative. But if you have any knowledge of the industry and pick a few to follow you did have good chance for big wins. But one lesson is to cut losses on big drops caused by disappointing news like clinical trial failures.This is not a “buy and hold” list but for traders and should be followed through Yahoo Finance or Seeking Alpha.

Since they are speculative stocks one should don’t have more than 5-7% within a healthcare portfolio as a total dollar investment. My biggest % winning trades YTD  were: GERN ,NVAX, TWST, and VCEL. My worst losing trades were: CYRX, QDEL and PACB. (A (-) means no trading yet in this stock. L =loss, $ =gains)

The following stocks are still long (H) in my Biotechnology Portfolio: ABOS, ADPT, RNA,CPRX, CRMD, CRSP, GERN, IMTX, NTRA, NVAX, SUPN, VCEL,VCYT.

Some trading guidelines that we have covered many times in the past:

1. SMID stocks track the XBI well. It is difficult to make money on smaller caps without help from the FUNDS like the XBI. The ARKG is an even bigger MOMENTUM indicator and as you can see it is down 28% YTD.
2. in broader biotech bull markets ETFs lie the IBB does well. It is barely up 1% YTD.
3. Volatility has been huge even for winning trades so a “day-trading ” tactic would have yielded better returns for stocks like;  CRMD,CYTK, NVAX. and of course the XBI.
4. Cut losses quickly on momentum shifts.
5. If you don’t want to trade buy a biotech fund like the PRHSX or JFNAX.

The last raging bull biotech market was 2021/2022 as it was catalysed by the pandemic. There is nothing like the MOMENTUM and gains achieved by Communication, Technology and Semiconductor stocks over the past 5 years. See chart below when the XBI hit $170 in JAN 2021.