After powering higher for much of the year, biotech stocks have started to falter a bit more recently.
Many of the majors reported second-quarter results that disappointed the Street, bringing the iShares Nasdaq Biotechnology Index ETF (IBB) down from $400 to $380 in late July.
True, biotech is still outperforming over the longer term … but the reality is that it’s showing signs of short-term weakness — which makes the group ripe for bearish trades.
In that vein, here are three biotech stocks that the Profit Scanner powered by Recognia is targeting for short-term bearish plays.
Biotech Stocks Flashing Warning Signs: Opko Health (OPK)
Click to Enlarge For Opko Health (OPK), the trouble began on July 24. The stock slid nearly 2% that day, and its chart confirmed signs of bearish momentum. Since then, OPK has put in seven more bearish signals as it continued lower through $16.50.
One of the latest came on July 30, when the Profit Scanner confirmed a Top Triangle on Opko’s chart. In other words, the stock looks to have topped and now seems to be reversing out of its prior uptrend.
If that weren’t enough, there were two other bearish signals on July 30 alone: The MACD turned short-term bearish, and OPK moved below its 50-day moving average.
Based on the Top Triangle, look for OPK to suffer a further drop to $12.10-$12.90 in the intermediate term.
Biotech Stocks Flashing Warning Signs: Advaxis (ADXS)
That name may sound familiar, as it’s one of the most popular chart patterns — and considered one of the most reliable, too. In this ADXS chart, you can see the “head” forming in June, with a “shoulder” on each side. Now that Advaxis has moved below the pattern’s “neckline,” it appears to be in a new downtrend.
ADXS may be hanging in there around $16 now, but eventually the Profit Scanner is expecting a drop to $2-$5 in the intermediate term. Also on July 29, the stock’s short-term MACD turned bearish as well. So, the stock is looking pretty ugly in the near term as well.
Biotech Stocks Flashing Warning Signs: Akorn (AKRX)
Click to Enlarge And finally, Akorn (AKRX) isn’t looking too healthy in the short term, either. It was looking fairly bullish for much of July — but then on July 29, AKRX completed a bearish Engulfing Line pattern.
The Engulfing Line doesn’t carry a particular downside target … but it does tell us that sellers are starting to overwhelm buyers, and Akorn is due to reverse lower. It gets its name from a black candlestick that completely envelops the previous white candlestick, suggesting that bears have taken the wheel.
On July 30, AKRX’s Commodity Channel Index also flashed a short-term bearish signal. This is basically more evidence that the stock is falling from an “overbought” state and is due for a further drop. You can see both signals in this AKRX chart.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.