Ishares Nasdaq Biotechnology (IBB)

The period of seasonal strength for biotech stocks is basically from mid-June to mid-September. The average gain for the NASDAQ Biotech technology index is about 8.17%, and has been positive 70% of the time since 1993. In this past week, it has broken out above the substantial trading range between $240 and $300. With the breakout, we can expect the magnitude of the range of about $60, to propel it to the upside by about $60, so the upside target is about $360.

A good time to Short? The one biotech ETF that he is really familiar with is this one. Most of the Short story is already built-in, so he would be reluctant to Short. Some of the names in this are doing okay, but some are at all-time lows. He would be reluctant to Short this.

Got into this couple of years ago, and it just never seemed to stop. Then it “stopped”. Now it seems to be stuck in a range and it is pretty close to the top of the range at almost $300. He loves the concept. There are going to be more demand for the products, and it is a real money maker.

All biotech shares are pretty volatile, and there have been some pretty big moves in the last couple of months. He expects this to run up and hit the high of $380, and then run past that. This is a generational change. Good space to be in long-term. 10 years and you should be very happy.

This space, along with healthcare in general, is in a secular long-term move, bullish in January and February with strong seasonality on a 5-year basis. It has been beaten up politically starting with Clinton, and we are not sure if that carries through with Trump. This is not for the faint of heart, but if you have a longer-term perspective, there is support at around $260, and if you get above about $300, there is probably going to be a bit of a break out. If you are looking to trade this, you would probably take a position right now. For a longer-term perspective, you may want to initiate a position now and see what happens with the new administration.

Biotech ETF. Institutions use this to trade. At Friday’s close we got closer to the 52 week lows. Hillary came out with a tweet about coming after the biotechs. He likes this long term for growth. He would be cautious here. No more than a third of a position. It could go 10 or 15% lower if she wins.

(A Top Pick Sept 4/15. Down 15.71%.) Clinton indicated she was going to do something about drug prices in the US, and this got whacked. In the last quarter or so, it is up 10%-20%, so it is working its way back.

He sees absolutely nothing wrong with being in the biotech sector. The fees are going to be low.

Has been a holder in the biotech industry at times through the post crisis period. In a post crisis environment, many of these types of industries tend to do really well. This one is aligned with the health boom and aging demographics. The biggest risk factor today is the US elections. Depending on your view of the US election and where the industry goes, it is a good hold longer-term.

Chart shows a nice jump from mid-June, and should probably continue all the way into November. He understands there are a lot of big health care conferences happening in September, October and November.

Using a 5-year chart, and looking at where the long term support is and their averages, this sector has broken down quite a bit. Wait and see what the new US administration does to this sector. It ran up tremendously for a number of years, and now we are in a correction mode. If Hillary gets her way, there is probably another leg down in this area. You could buy a half or a 3^rd just to be in there, because it has corrected significantly from the highs.

She likes Biotech’s. They are within the healthcare sector, and by far one of the more attractive industries. There is an enormous amount of double digit growth that we are still expecting from Biotech’s. They are trading rich, but that is because they are growing 2-3 times faster than the rest of the market. Sees this as a safe entry point.

Biotech’s have gone through a lot of negativity. Seasonally, right around now is when this sector starts to get accumulated by the professionals, because we get into the fall and Christmas area where there is a lot of biotech conferences. Typically, about 70% of all announcements are made somewhere between November and January in Biotechs.

In the past few days there has been a huge run up since mid-May, and has bounced off significant support 3 times since February. It is bumping up against resistance of about $290. If it can break above that, it could imply significant upside potential. Chart shows a downward trend line and is currently bumping up against resistance, but shows a nice triple bottom.

Biotech is a very volatile area of the market. This index has options on it. If you are a believer in Biotech, then you are really saying you are a growth investor that has a speculative bent that is looking for a real big move. Rather than paying $250 or so, you might want to think about getting an at the money call option, paying $20, and go for the ride. The worst case scenario is that you will lose $20.