Biotech Stocks Are Outperforming
Dragonfly Capital | Jan 15, 2019 08:01AM ET
Since making a low on Christmas Eve, equity markets have had a remarkable push higher. My bear market friends are quick to point out that some of the strongest rallies happen in a bear market. But we have also witnessed some very strong ‘V’ shaped recoveries in the past 5 years. While the debate rages on one thing is certain. Biotech stocks are outperforming.
The chart of the Nasdaq Biotech Index, $IBB, below adds some color to that. Since making a bottom it has retraced between 50% and 61.8% if the move down. This is a 20% move higher. In contrast the S&P 500 has retraced about 38.2% of its move down and gained just under 12%. This is the kind of outperformance you want to look for in volatile markets.
The question now is, will it continue? That is not so easily answered. Momentum indicators suggest a pause at least and possibly some kind of reversal is in store. The RSI is pulling back and the MACD leveling. These are not bearish indications short term but waning momentum. It could lead to a consolidation to reset the indicators or it could result in a pullback in the Index.
The Index also has not made a higher high. Should it resume and move over the early December high more buyers would likely pile in. Another milestone would be a move over the 200 day SMA. This would also attract more buyers. A drop back under the 50 day SMA would suggest to me more pullback is coming.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.