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Tickers in this Article: JAZZ, QCOR, IDIX, ONTY
Many stocks in the Biotech sector are at a critical juncture after spending most of the summer and autumn consolidating. With the markets at a crossroads, it makes sense that many stocks would be as well. This group is certainly worth keeping an eye on, as it is prone to explosive moves and provides some good opportunities in the near future.

Jazz Pharmaceuticals, Inc. (Nasdaq:JAZZ) has been a great performer in 2011 with a gain of almost 100% since the start of the year. It has been consolidating since August, despite the spike higher in September. JAZZ has been drifting back since tagging $47.88 and has been seeing a decrease in volatility and volume. This is constructive behavior and is typical for a stock taking a rest break. JAZZ is currently testing a trendline that has been marking recent highs and is also attempting to reclaim its 50-day moving average. Any strength that holds above $40 could signal that its ready to make a run at its recent highs. (For more, see The Utility Of Trendlines.)




Oncothyreon, Inc. (Nasdaq:ONTY ) is a lower-priced Biotech stock that is at a critical juncture as well. ONTY has been working on a base since spiking over $11 in July and then falling apart in a spectacular decline. After the very volatile few weeks, ONTY settled down, as it traded sideways the rest of the year. It was able to creep above the high $7s, which had been acting as resistance in early December. It has been drifting back towards this area and needs to show some strength soon or be faced with a deeper correction back towards $6. The 50-day moving average near $7 would be a possible area to watch if it can't hold up here.




Questcor Pharmaceuticals, Inc. (Nasdaq:QCOR) has also had a great run this year as it rallied from a March low near $12 to over $45 by year's end. QCOR has been trading in a tight base since gapping higher in October. Despite leaving a large gap below, QCOR has been finding buyers on any weakness, which is a clear sign of strength. Any breakout above $45 would put QCOR at all-time highs.




Idenix Pharmaceuticals, Inc. (Nasdaq:IDIX) is another lower-priced stock in this sector that is at an important area. IDIX cleared a key resistance level near $7 in November and has managed to stay above it since then. It did spike under the level on a couple of occasions, but buyers rushed in. It is now forming a tight consolidation above the prior base and could make an attempt at multi-year highs if it clears $8 to $8.50. (For more, see The Ups and Downs Of Biotechnology.)


The Bottom Line
It is not really surprising that these stocks find themselves at a critical juncture at the same time as the market indexes. Most stocks stay correlated to the general markets and for the most part move in unison with the indexes. However, they do differ in the amount of volatility or beta. If the markets can continue to build on recent strength, then these stocks could break above the resistance levels shown and outperform the indexes. However, it would be difficult to rely on these stocks if the markets back off existing levels. As is more often the case, traders will need to remain patient and keep an eye on the general markets as they consider this sector. However, the possible reward makes it a group worth monitoring. (For more on this topic, check out A Primer On The Biotech Sector.) Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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