(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Biotech stocks are one of the hottest sectors in the stock market, as measured by the SPDR S&P Biotech ETF (XBI). The ETF has very quietly climbed by 11.5% on the year, easily outpacing the S&P 500's return of only 1.2%. While the biotech ETF is 2.5% below its all-time high, it has been the small- and mid-cap biotech stocks that have been carrying the sector higher.
If the sector is to continue to rise, it will take stocks such as Spark Therapeutics Inc. (ONCE), Intercept Pharmaceuticals Inc. (ICPT), and Seattle Genetics Inc. (SGEN) to help it rise. Based on analysis of the chart for the stocks, each appears poised to increase by roughly 12% or more in the coming weeks.
Shares of Spark are up by nearly 57% so far in 2018, and despite that steady rise, the stock is still about 11% off their one-year high of $91.75. The chart has a technical pattern called a rising triangle, a bullish continuation pattern, created using the long-term uptrend and a technical resistance level at roughly $83.20. Should the stock rise above the resistance price, the stock could climb to near its all-time high to around $91, a jump of 12.5% from its current price of $81. The relative strength index (RSI) has been trending higher and is currently at a level of 60, which suggests the stock price has further to rise before hitting overbought levels at 70.
Seattle Genetics shares have been trading sideways since August 2017, in a trading range between $48 and $60. The stock appears to have broken out of a symmetrical triangle pattern, a bullish continuation formation, which is now nearly two years old. With the stock breaking out and rising above the triangle pattern. It gives the stock room to increase back to the next level of resistance at $69.50, from its current price of $61.50, a jump of about 13.25%.
Intercept Pharmaceuticals appears as though it would break out at the start of April and failed. Now the stock is making a second attempt to rise above a significant resistance level at $76.40, and should it rise above it. The stock has room to run higher to about $86.50, a jump of about 20.5% from its current price of $71.85.
If these three stocks can continue to push higher, it would serve as a good indication that the rest of the sector can stay hot and continue to rise in the coming weeks.
Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.