When looking at which sectors are performing best, there is one sector that always seems to be near the top of the list--Healthcare. Whether I look at data over the last years, 3 months, or the last week, the healthcare sector continues to put up strong numbers. The biggest contributor to this sector is biotechnology, an industry which has led the healthcare sector on almost every time frame over the last year. This is largely due to a high number of small cap stocks that have seen some staggering gains; there are 15 stocks up over 20% in the last week alone. Here, I'll focus on four biotech stocks with markets caps over a $1B, but even then the gains are impressive. All these stocks moved up more than 6% over the last week, compared to the SPDR S&P 500 (ARCA:SPY) which is up 1.3%. Here is how these stocks look technically going forward.

SEE: The Ups And Downs Of Biotechnology

Clovis Oncology (Nasdaq:CLVS) is up 12.59% over the last week, showing that it can be a very risky and volatile stock. At the start of June the stock doubled, in one day! Since then the price has been confined within the price span of that single massive daily bar, from $50 to the intra-day high of $86.29. News surrounding a potential sale of the company makes a technical outlook on this stock difficult, not to mention that many of these biotech share prices are largely reliant on drug trial results. Over the next month though it appears, at least based on the technicals, this stock is going to move higher. Short-term momentum has shifted back to the upside, after the price declined through much of August. I'd be looking for the price to move back toward $80, with a breakout above $82 signaling a likely further advance toward the high at $86.29. Getting in is quite tricky at this point as the nearest support area is between $60 and $59. The long tail on Friday indicates some short-term selling pressure which could push the price down a little closer to that support level for a lower risk entry, but I wouldn't hold my breath.

Regeneron Pharmaceuticals (Nasdaq:REGN) is up 7.22% over the last week, and has a more normal looking chart. Several days ago the stock broke out of a large consolidation which had been preceded by a advance from near the $180 mark to near $280. Based on three different technical methods for establishing profit targets, I'd expect this stock to continue rising into the $340 level; this is where the three targets are clustered within a few dollars of each other. $280 to $275 should now act as a support area, so if the price drops much below that, a larger decline is likely.  

Halozyme Therapeutics (Nasdaq:HALO) is up 6.71% over the last week and very near a key resistance level at $10; it hasn't traded above this level since August 2012. If the price can break above it there is a potential resistance area at $10.50 but if that is cleared a target of $12 to $12.50 is probable. If the price drops back below $8.50 it is quite likely this stock could start ranging again between about $8.50 and $5, as that has been the dominant tendency going back to 2008.

AbbVie (NYSE:ABBV) is up 6.30% over the last week, with much of that coming on September 17 as the stock rose 3.88%. This follows a breakout from a consolidation pattern had been in place since June. The breakout indicates a price target near $50. Support is near $45, so I wouldn't expect the price to drop much below that before moving higher, but if it does it indicates a failed breakout to the upside and we may need to wait for another opportunity to get in. If things get really ramped up in this stock, there is another target just below $58 for a little longer-term trade.

The Bottom Line
Biotechnology stocks can experience sharp news related spikes and falls, therefore, caution is warranted when trading these stocks as the risks, and rewards, can be high. Based on the targets make sure the entry price allows for enough profit to warrant the risk. Sometimes that means waiting for a bit of a pullback, and if it doesn't occur, then the trade should pass on. With potential for big swings, always manage your risk.

At the time of writing, Cory Mitchell did not own shares in any of them companies or funds mentioned in this article.

Charts courtesy of StockCharts.com.

Related Articles
  1. Forex Education

    "Do The Right Thing" For Trade Breakouts

    Often in life, the right action is the hardest to take. Discover how to get on the right side of a trend.
  2. Options & Futures

    Backspreads: Good News For Breakout Traders

    This bullish trading strategy offers unlimited potential profit with limited risk.
  3. Entrepreneurship

    10 Breakout Ideas For Small Businesses

    If your business has hit a wall, we've got the answer to break through and increase sales and earnings.
  4. Trading Strategies

    The Anatomy Of Trading Breakouts

    We'll walk you through this trading strategy from start to finish.
  5. Active Trading

    The Ups And Downs Of Biotechnology

    This volatile sector can provide huges gains, but there's also lots of downside.
  6. Trading Strategies

    How To Buy Penny Stocks (While Avoiding Scammers)

    Penny stocks are risky business. If want to trade in them, here's how to preserve your trading capital and even score the occasional winner.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total World Stock

    Learn about the Vanguard Total World Stock exchange-traded fund, which invests in stocks located in numerous countries with a high level of diversification.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  9. Mutual Funds & ETFs

    ETF Analysis: BioShares Biotechnology Products

    Learn more about the BioShares Biotechnology Products fund, an exchange-traded fund that is focused on producers of FDA-approved drugs.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  4. Indicator

    Indicators are statistics used to measure current conditions ...
  5. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  6. Medical Identity Theft

    Stealing another person’s health insurance information so that ...
RELATED FAQS
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. What role does the agency problem play in the modern Health Care industry?

    Agency problems vary from health care system to health care system, and not all economists agree on the degree and desirability ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!