How To Play The Biotech Bust

58 0 1
Biotech stocks had tremendous runs over the last few years. Many advancing several hundred percent. But all good things in the stock market come to end, and the biotech group is no exception.

The advance over the last four to five years clearly reflected the improved growth rates that we saw biotech companies deliver over those years, and current fundamentals remain strong. Unfortunately, analysts have been revising their estimates downward, and now expect a major deceleration in growth over the next three years.

From a technical stand point, biotech stocks are clearly the weakest group in the medical sector and stock market. They are ranked at the bottom of the Investor’s Business Daily’s Industry Groups.

The group, as reflected by the Ishares Biotech ETF ( IBB             ), has dropped over 40% since the market topped in July 2015, after advancing over 400% since 2011. On average, former leading stocks and groups, drop over 60% after topping.

How To Play The Biotech Bust
There are several options traders have to capitalize on the bust. They can short individual biotech stocks, or they can buy and/or short biotech ETFs. There are three ETFs that can be traded to take advantage of any biotech sell off.

The Ishares Biotech ETF ( IBB             ) has pulled back to its fifty day moving average in low volume , after breaking down from a bearish head and shoulder base, in heavy volume , at the beginning of the year.

The ETF can be shorted right around the fifty day moving average as volume continues to dry up, or breaks down, in heavy volume , below $242.

Ishares Biotech ETF IBB            
Ishares Biotech ETF ( IBB             ) Pullback To 50 DMA in Low Volume

Aggressive traders can consider going long two biotech leveraged ETFs. The ProShares Ultra Short Nasdaq Biotechnology ETF (BIS), 2x leverage, or the Proshares Ultra Pro Short Nasdaq Biotechnology ETF ( ZBIO             ), 3x leverage.

The entry point would be at the same time as the Ishares Biotech ETF ( IBB             ) either stalls or rallies to the fifty day moving average in low volume , or starts to break down in heavy volume .

Whichever route you choose, the market will have to trend lower. As much as the group has wanted to break down over the last few weeks, it has been held up by the market’s rally attempt. But based on the poor relative strength of the stocks and ETFs that represent the group, it is clear, at least for now, the group wants to go lower.
ZH 简体中文
EN English
EN English (UK)
EN English (IN)
DE Deutsch
FR Français
ES Español
IT Italiano
PL Polski
SV Svenska
TR Türkçe
RU Русский
PT Português
ID Bahasa Indonesia
MS Bahasa Melayu
TH ภาษาไทย
VI Tiếng Việt
JA 日本語
KO 한국어
ZH 繁體中文
AR العربية
首页 股票筛选器 外汇筛选器 Crypto Screener 财经日历 如何运作 图表功能 网站规则 版主 网站 & 经纪商解决方案 插件 图表库 功能请求 博客 & 新闻 常见问题 帮助 & 维基 Twitter
个人资料 个人资料设置 账号和账单 我的支持通知 联系支持 已发表观点 粉丝 正在关注 私人消息 聊天 退出