Biotech is moving, here’s 4 ways to trade it

  • November 3, 2005
  • Tim Truebenbach



Timothy J. Truebenbach is the President of True Capital Management and
general partner of True Capital Partners LP, a hedge fund. He uses a
disciplined model that trades on the intermediate-term time frame. For a
free trial to Tim’s Nightly Stock Analysis Report

href=”https://tradingmarkets.comsubscriptions/details.cfm?item=5915&subcat=it”>click here or call 888-484-8220 ext. 1.

It is great to be bullish before
everyone else and that is just what we were ahead of this latest rally in the
NASDAQ.

The only way you could have been better prepared for the NASDAQ’s move from its
bottom on 10/13 than simply reading this column was to be a part of our daily
trading service. One thing that was mentioned in last evening’s post was that
the NASDAQ would most certainly face resistance in its ascent at 2,166 and again
at 2,186. Today’s action reflected just that as the index was unable to break
through this first level.

The largest indication of a continued rally that we are watching is for the
NASDAQ to break above 2,200. It has made two prior attempts, on 7/21 and 8/2
before succumbing to a correction over the last couple of months. The index is
in a newly confirmed rally as of the follow-through day on 10/19 and if history
provides us with an accurate gauge, we will most likely succeed to break above
2,200 on the next try.

Incidentally, you may also want to note recent history in which the NASDAQ took
a third attempt to get above major resistance at 2,100: 6/2/2005, 6/23 and
finally success on 7/8.

Please let me apologize in advance to those non-technical traders out there, but
there was just no way to get around the technical nature of this article…it is
what is driving the market at this point. We don’t always go the technical
route, i.e. past article on the Dow’s historical precedence; but this is a good
time to point out that it is always most profitable to be versatile in your
analysis of the stock market.

We continue to see strong leadership out of a broadening group of stocks.
Internet stocks, consumer technology and new emergence from biotech has been
leading the path. As this market gets moving, I cannot emphasize enough that it
is important not to forget about the biotech group. When I look at long-term
monthly charts of names like Amgen
(
AMGN |
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PowerRating), Genentech
(
DNA |
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PowerRating), Lifecell
(
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and Genzyme
(
GENZ |
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PowerRating) I am seeing a consistent move out of a long base. This
is only the first point of a strong case for these stocks to continue higher.

The second and equally strong point not to forget about this group is the fact
that it does well in rising rate environments. I don’t believe anyone would
argue that we are in a rising rate environment! We remain in a confirmed uptrend
and buying any weakness into resistance is a strong plan moving forward. A
combination of leading stocks and broad-based ETF’s remain good choices for a
portfolio. If you have any questions or feedback please do not hesitate to
contact me: comments at truecapitalmanagement.com

 

Tim Truebenbach