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.