(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Biotech stocks have been hot since the beginning of May, rising by about 13% as measured by the iShares Nasdaq Biotechnology ETF (IBB), more than double the pace of the S&P 500's rise. But four stocks in the group appear to be headed lower in the weeks ahead, falling by as much as 13% based on technical analysis.
Shares of Intercept Pharmaceuticals Inc. (ICPT) have risen by more than 63% since the beginning of May, while recently posting better-than-expected quarterly results that beat on both the top and bottom lines. But now shares are poised to give back at least some of those gains, by as much as 13% from their current price of $114.60. The stock has run into a level of technical resistance around $118, posing as the first issue. Additionally, the relative strength index is showing signs that the stock is now overbought, rising above 70 three times since the start of June. Should the stock decline, it is likely to fall to technical support at $99.70.
Exact Sciences Corp. (EXAS ) stock has already plunged by nearly 28% from its June peak and could be heading lower by another 9% in the coming weeks. Shares gapped lower following disappointing second-quarter results and have been unable to rise above resistance around $51.70. The stock has been attempting to rebound recently but has done so on declining levels of volume, suggesting that buyers aren't presently running in to acquire the stock. Should the stock continue to head lower, the next level to watch would come at the long-term downtrend, around $46.
Biogen Inc.'s (BIIB) stock has been extremely volatile, as investors try to digest the results from a clinical trial for one of its key drugs in development for Alzheimer’s. It leaves shares vulnerable to retest a technical uptrend that has been in place since early May. Should that happen, the stock could fall to roughly $315, a drop of about 7% from its current price of $343.
Amgen Inc.'s (AMGN) is nearing a potential pullback, with the stock sitting just above technical support at $191. Should the stock fall below support, it would have room to drop to the next level of technical support at $182.50, a decline of about 6.5%, from its current price around $195.
In most of the cases, investors appear to merely be looking to take profits in what has been a hot sector.
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.