Trade Alert: New Biotech Breakouts Revealed

The Fed just tried to throw a stick in the market’s spokes.

The economy is strong, and unemployment and inflation are low, chairman Jay Powell declared, prompting the Fed to hike rates for the second time this year.

Powell also signaled more hikes are on the way. Fed-watchers are now predicting two more increases during the second half of the year.

The potential for a total of four rate hikes in 2018 churned stocks. The Dow led the major averages lower as it reversed course and shed more than 100 points. The S&P and Nasdaq Composite also finish in the red.

All this talk of the Fed tightening is clearly creating a little anxiety — just not enough to derail the market’s positive momentum just yet.

That’s why I skipped the live feed of the Fed presser yesterday. I’ll let the news junkies pick it apart. In the meantime, some bullish charts have caught my eye…

Last week, we watched the SPDR S&P Biotech ETF (NYSE:XBI) quietly rally off its April lows to post new all-time highs. Smaller biotechs have led the charge. Many of these speculative names have posted some incredible gains over the past couple weeks.

But bigger biotechs have been relatively quiet.

Until now…

While Fed drama distracts the herd this week, bigger biotechs have started to make a move. Many of the flagship stocks in the sector beginning to show relative strength. Others are attacking important resistance levels.

Remember, the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) had quietly consolidated just above its 2018 lows last month. The big biotech ETF finally found some buyers and jumped to new two-month highs last week.

We noted how strong moves from some of the biggest biotechs on the market fueled the gains. Gilead Sciences Inc. (NASDAQ: GILD) — a stock that was pushing new 2018 lows as recently as one month ago — is back from the dead and closing its May earnings gap. Biogen Inc. (NASDAQ:BIIB) — the ETF’s biggest holding — is fighting back above its 200-day moving average for the first time since February.

Big Biotech

Many of the flagship biotech names had failed to participate in the market’s comeback rally up to this point. As they recover, speculators are returning to the sector in search of fast gains.

With IBB back above its 200-day moving average for the first time since late March and risk appetite for biotechs growing by the day, we’re lining up more opportunities to book gains from some of these fast-moving stocks.

Last week, we picked up shares of Ocular Therapeutix Inc. (NASDAQ:OCUL). Thanks to a strong breakout move, you have an opportunity to sell half your positions for double-digit gains this morning. Not too shabby for a week’s work…

If some of these mega-cap biotechs can return to their former glory, we’ll have a shot a more trades like this in the days and weeks ahead…


Greg Guenthner

You May Also Be Interested In:

Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner