Trading By the Numbers: 3 Drug Stocks To Cure What Ails
Markets that go on one-way runs are a reminder of why it is good to build a portfolio of strategies rather than simply a portfolio of stocks, all of which are following the same strategy.
What does this mean in practice? It means having a mix of more conservative strategies and more aggressive strategies. It means diversifying your portfolio by duration, including both short term and longer-term trades and investments. It means, of course, taking advantage of not just stocks but exchange-traded funds (ETFs) as well.
And it also means being able to take advantage of edges when they appear on the long side and on the short side. If markets can only do three things: go up, go down, go sideways, then making sure your porfolio includes both long and short trading strategies will go a long way toward helping you succeed regardless of market environment.
Today’s Trading By the Numbers article takes a look at three drug stocks, two with growing edges to the long side and one that may have rallied “too far, too fast, too soon” and be ready for reversal.
First up, the pullbacks. Shares of Quidel Corporation (QDEL) have sold off by 2% heading into trading on Monday. QDEL rallied to new, year-to-date highs just last week, and the stock may be worth keeping an eye on especially if profit-taking continues into next week.
Also pulling back after rallying to new, year to date highs are shares of Seattle Genetics (SGEN). Little changed in trading on Friday, shares of SGEN have finished lower for three out of the past five trading days. Again, further weakness in this stock could lower SGEN to levels from which it has historically made significant short term gains. The last time SGEN pulled back to similar levels was during the late September pullback that led to the stock’s recent highs.
The last stock for today is also a drug stock. But it is one that has been gaining ground in bear market territory for the past five days in a row, the last four in technically overbought territory below the 200-day. Should shares of this stock, Auxilium Pharmaceuticals (AUXL) continue to close higher, the likelihood of sellers emerging to take profits will grow – as well as to potential of traders renewing their short positions.
The stocks in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com