Gilead Sciences (NASDAQ: GILD) recently began offering a new hepatitis drug. Experts note that GILD’s drug helps about 90% of patients who take the drug and has few side effects. Older drugs only helped about half of the patients and had a number of side effects. While GILD’s drug offers medical benefits, the price tag has led to questions from Capitol Hill. A course of treatment with GILD’s drug can cost $84,000 and Congress is concerned about the impact high-priced drugs like this can have on Medicare and Medicaid.
After news of the questions from Congress broke, shares of GILD fell and the stock closed down more than 4.5% on Friday. At the close on Friday, GILD had a PowerRatings of 8.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 8 on a 5% pullback the next day and selling five days later has been profitable 72% of the time with an average winner of 3.9%. Other entries and exits also show high winning percentages and large average gains.
Other biotech stocks fell on Friday along with GILD. iShares NASDAQ Biotechnology Shares (NYSE: IBB) will head into Monday’s trading with a PowerRatings of 9. GILD is the second largets holding of IBB which explains why the ETF was also down on Friday. ConnorsRSI confirms that IBB is oversold with a reading of 8.96.
GILD could provide gains in the next week if it rebounds from the bad news. Traders should also consider IBB, an ETF which would benefit from the rebound if it occurs. ETFs generally carry less risk than individual stocks because they diversify their holdings and have less exposure to individual companies.
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All data is as of the end of day on 3/21/2014.