3 Biotechnology Stocks for Short-Term Traders
With US stocks continuing to edge higher, there are a few sectors where it appears that profit-taking may be accelerating. And having recently looked at distribution in the transportation sector, today’s report reviews growing short-term weakness among biotechnology stocks.
The fact that the S&P Biotech SPDRS ETF (NYSE: XBI) has closed lower for two days in a row and is now oversold in bull market territory is the clearest sign that traders in the sector have begun to lock in gains. XBI rallied to new, 52-week highs on Monday and after two days of profit-taking have moved lower by more than 3%. More importantly, the ETF is now trading at levels where, historically, traders have tended to come off the sidelines as buyers rather than sellers.
Looking deeper, we can see key biotechnology stocks like Amgen (NASDAQ: AMGN), Celgene (NASDAQ: CLG) and Biogen Idec (NASDAQ: BIIB) all retreating from recent annual highs. Shares of Amgen were down more than 1% on Wednesday, closing lower for four out of the past five trading days. Celgene also closed lower on Wednesday, finishing lower for three out of the most recent four sessions. Down two in a row ahead of trading on Thursday, shares of Biogen Idec, like those of AMGN, lost more than 1% on the day, as well.
But with the neutral ratings all three of these stocks have earned so far – and positive edges of less than half a percent – it is also true that AMGN, BIIB, CELG and other biotechnology stocks may have further to fall. None of the three stocks, for example, has pulled back into technically oversold territory, yet. And none of the stocks has sold off enough to reach, for example, significant, new, short-term lows.
As such, traders looking for short-term weakness to buy may want to keep these biotechnology stocks on their watchlists. Should sellers become more aggressive here in the second half of the week, there is a good chance that many of these stocks could earn significant ratings upgrades by early next week.
Note also that XBI, which has finished in technically oversold territory, has a positive edge of three quarters of a percent heading into trading on Thursday.
Want more stocks? Read our latest from 7 Stocks You Need to Know: “The Intel Pullback as Pitstop: Three Down, Six Up”.
David Penn is Editor in Chief of TradingMarkets.com