The last few trading days have given investors quite a ride.
It's no secret Friday-to-Monday's sell-off scarred many retail investors out of the market. As share values dipped across every sector, biotech investors felt the pain too.
It all started last Friday. Market reaction to rumors of the Federal Reserve's planned rate hikes kicked off a frenzy of selling.
For two days we were harshly reminded what happens when sellers control the action.
Biotech was no exception. Looking at the S&P 500 Biotech index, its clear Monday's slide took no prisoners, despite the sector's strong bullish nature.
The chart from Friday to Monday isn't pretty.
But as panic settled and cooler heads began to prevail Tuesday, we started seeing shares tick up again, with some recovering most of their losses.
The most recent two day S&P 500 Biotech chart tells all. The index has risen almost 4% since Tuesday's open.
Now I'm not saying the volatility of the past few days is completely over.
But we certainly are seeing a more sophisticated sentiment taking the reins as the week progresses.
Our newest income and market expert, Mike Burnick relayed this sentiment:
"The health care and biotech sector is relatively undervalued right now in an overpriced stock market, but that hasn’t hurt the performance of health care stocks."
"The sector," continued Mike "jumped 10.7% in January, an even faster start than the overall market. Biotechnology stocks, a subset of the health care sector, are performing even better, up 13%."
So how can you capture these earnings?
By keeping in mind that biotech, more so than any other sector, is an event driven industry.
Mergers and acquisitions, positive earnings reports and successful FDA trials are three crucial indicators to whether a biotech stock is worth buying.
Even on down days.
Take for example the recent deal struck by Celgene Corp (NASDAQ: CELG) to purchase Juno Therapeutics (NASDAQ: JUNO) for $9 million.
The news pushed Juno shares to a 52-week highs to end January, as reported by Yahoo Finance.
Another biotech worth considering is Exelixis Inc. (NASDAQ: EXEL).
The company recently received FDA approval of a new cancer treatment that according to a recent NASDAQ industry report "should further boost demand" and send share values higher.
The company is a rare winner through this weeks action, posting almost 2% in gains through the sell-off.
And looking forward through the rest of February, we will have a ton of biotech's reporting earnings.
Those beating expectations could be strong short term trades, and some may even grow into great long term investments.
For example, EXEL is scheduled to report results on Feb 26. Already on the rise in 2018, we may see a significant spike in share value come March.
If earnings come back positive as anticipated that is.
The theory behind the strategy is simple for biotech. Watch these three event drivers closely, and act when they signal positively.
Easier said than done of course, but the proof is in the data.
Biotech stocks are a great way for you to pull profits whether the market is bearish or bullish.
For Technology Profits Daily,
Ray Blanco
Chief Technology Expert, Technology Profits Daily