(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Biotech stocks have been surging in 2018 as measured by the SPDR S&P Biotech ETF (XBI), which is up nearly 18%, easily outperforming the S&P 500 rise of 5%. Despite the recent gains, shares of Regeneron Pharmaceuticals, Inc. (REGN), Seattle Genetics, Inc. (SGEN) and Intercept Pharmaceuticals, Inc. (ICPT) may be poised to rise by as much as 20% in the coming weeks based on technical analysis. (For more, see also: Top 5 Biotech Stocks for 2018.)
The sector had been off to a hot start at the beginning of the year but gave most of the gains back by the end of March. It was at the end of April that the sector caught fire. Now it looks like the group has further to rise.
Based on the technical chart for the Biotech ETF, the sector may increase by another 9%. The technical pattern in the ETF has a rising triangle, a bullish continuation pattern. The ETF has risen by about 10% since bottoming around $92, increasing to about $101 or $9. A breakout from the triangle may send the ETF higher by a similar amount.
Regeneron stock has been rising steadily since breaking out of a nearly one-year downtrend, with shares increasing by almost 33%. Now the stock has another bullish pattern forming—a technical continuation pattern known as a flag. It suggests a rise to the next level of resistance at roughly $394, an increase of about 7% from its current price around $367.
Seattle Genetics may rise by about 8% in the coming weeks. Shares have already broken out of a multi-year technical symmetrical triangle, increasing by about 17.5% to its current price around $70.25. Now shares have broken out again, clearing technical resistance at $69.50, and that means shares may rise by nearly 8% from its current price to the next level of resistance around $75.50. (For more, see also: 4 Biotechs on Verge of Big Breakouts.)
Intercept's stock may have the most to gain while nearing a potentially big breakout. The stock has already nearly doubled in 2018, rising to its current price near $94, from its lows of around $51 in February. Should shares rise above technical resistance at $99.70, they may go higher by roughly 20% to $113 from its current price. That would allow the stock to refill a technical gap from September of 2017, when the stock dropped from $113 to $99.70.
Despite some of these stocks already having big moves thus far in 2018, it would seem there still may be plenty of room left to rise.
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.