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Many posts in my tab this year have either directly or implicitly discussed the biotechnology sector. Indeed, the group as a whole has been a monster to the upside in recent months, and that type of outperformance commands your attention. Today, the biotech’s are outpacing just about every other sector and major index in the market.
Inside 12631, we have been constantly discussing biotech stocks, and not because we are inclined to trade them (we are not), but rather because we are respecting the market’s price action and message. Trading biotechnology stocks may sometimes feel akin to holding a pin less hand grenade, given the FDA’s propensity towards surprise announcements that can literally crush or explode a stock price in a matter of moments.
However, as I discuss at great length in this post, you must not let a few outlier events in a stock or sector dissuade you from high probability trades and opportunities. Currently, the biotechnology sector remains in bull mode, and I see quality setups and follow-through. It is very easy to talk a big game about being objective and remaining disciplined in the market, but a major reason why we have cultivated large readership here on iBC and a growing subscriber base in The PPT and 12631 is because we execute, too.
I am not inherently a biotechnology bull, but when the going is good I am going to play along, with stops in place. As the biotech space heats up, there may indeed be reason for caution as it potentially becomes a crowded trade. Here again, respecting technically and the psychology of the market is important, rather than carrying over hang-ups about the sector in general.
