http://www.pennystockdetectives.com/biotechnology-stocks/price-momentumevaporates-but-not-with-these-stocks
Price Momentum Evaporates—But Not with These Stocks
The prospect of getting meaningful, above-inflation economic growth is pretty slim these days. There is record sovereign debt in the eurozone, and in the U.S. China engineered an economic slowdown, and will have a tough time coming out of it. So, where do you find growth in a stock market with limited prospects for advancement? My answer is biotechnology stocks; traditionally a high-risk/high-reward stock market sector. And, you don’t need financial growth for biotechnology stocks to move. In my view, this stock market sector is the most attractive for risk-capital speculators in this kind of market. I still like gold and silver, and these commodities belong in equity portfolios, but trading action in biotechnology stocks remains robust, even with the broader stock market pulling back. As you know, biotechnology stocks move on events, and you can trade off news and price momentum. A great example is Keryx Biopharmaceuticals, Inc. (NASDAQ/KERX), which is a New York City-based company working on treatments for renal disease, otherwise known as kidney failure. This stock got overbought on the stock market (a great momentum trade) in the first part of the year, then corrected to super-penny stock status. But, the position has been recovering since May, and the stock has displayed real price momentum, up 60% since. Keryx’s stock chart is below.
Chart courtesy of www.StockCharts.com
The NASDAQ Biotechnology Index has been a powerhouse wealth creator over the last few years. The index most of thebiotechnology stocks within the entire sector universe that are worthy of consideration. One such company is Arena Pharmaceuticals, Inc. (NASDAQ/ARNA), which has been on fire all summer. This San Diego, CA-based company is working on oral drugs for cardiovascular, inflammatory, and central nervous system diseases, with several products in development. Among most biotechnology stocks, this company’s price momentum has been exceptionally strong, moving from the $2.00 per share level in late April to just under $12.00 a share in July. The company’s stock chart is featured below.
Chart courtesy of www.StockCharts.com Playing price momentum and getting out before the party ends are key when speculating in biotechnology stocks. The broader stock market looks to have topped out (at least for now), and price momentum among other stock market sectors is tough to come by. There are very few industry groups in this global economy with growth prospects above the rate of inflation. Healthcare and drug development are poised to outperform most other sectors, and biotechnology stocks will continue to provide good trading action, because institutional investors continue to participate in the sector for capital gains.
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