The bull market beat rolls on this week with stocks hot right out of the gate Monday morning. While some sectors are pushing into overbought territory, others are just starting to run. Like biotech stocks, for instance. They’ve been leading for months now and were nice enough to form a pullback last week for spectators looking to get in on the action.
For broad sector analysis look no further than the SPDR S&P Biotech (ETF) (NYSEARCA:XBI). It’s the most liquid of a handful of biotech ETFs and tracks the who’s who of the industry. XBI is up 43% year-to-date and rocks all-star technicals. Last week’s retreat was born of profit-taking.
The emergence of sellers shouldn’t be surprising given the fund’s lofty perch. The previous advance carried XBI well into overbought territory suggesting it was high time for a pause.
But the nature of the pause was as bullish as it gets – shallow and short-lived. With buyers once again wresting control today, the time to buy biotech stocks is now.
Here are three to sink your teeth into.
3 Biotech Stocks to Buy Now: SPDR S&P Biotech (ETF) (XBI)
Instead of trying to pick the winners in the sector, why not just buy the whole space? It offers diversification, and you don’t need to worry about any pesky earnings gaps. For these reasons, XBI is our first pick. You’ve already learned of the glorious year-to-date gains so let’s dig into its recent price action. XBI’s last advance carried the fund well above its rising 200-day, 50-day and 20-day moving averages.
What’s more, the upswing transpired on heavy volume showing institutional support. Better yet, last week’s pause didn’t see any aggression by sellers. The price retreat was shallow, and the volume was minimal. That type of correction makes it easy for buyers to take back control when they kick-off the next rally.
And if today’s jump is any indication, it appears the rally has indeed begun.
Buy Nov $85 calls for $2.86.
3 Biotech Stocks to Buy Now: Celgene Corporation (CELG)
If you prefer to play individual biotech stocks, then Celgene Corporation (NASDAQ:CELG) should top your list. It had a sluggish start to the year but has begun to pick up steam in recent months.
CELG stock boasts a year-to-date gain of 23%. Like XBI, Celgene has been in digestion mode over the past two weeks. But while XBI’s pause had a downward tilt to it, CELG has continued to drift higher.
And I suspect that’s a good thing as it shows buyers gobbling up every little intraday dip. Volume patterns are solid showing accumulation aplenty beneath the surface which should continue to propel the stock higher.
There’s also the fact that CELG is popping to new all-time highs which is always a hallmark of strong stocks to buy.
Buy the CELG Nov $145/$150 bull call spread for $1.79.
3 Biotech Stocks to Buy Now: Gilead Sciences, Inc. (GILD)
In June Gilead Sciences, Inc. (NASDAQ:GILD) turned a corner and it hasn’t looked back since. GILD was locked in a downtrend unable to escape for years.
But three months ago buyers staged a breakout, and they’ve been dominating ever since. Accumulation days litter the landscape showing aggressive buying during the last three upswings.
We’ve now seen a strong enough rise to reverse the 200-day moving average higher which is no small feat. And, of course, the 50-day and 20-day moving averages are pushing higher in bullish fashion as well.
Last week’s mild bout of profit-taking has created a potential dip buying opportunity. Watch for a break above Friday’s high ($83.50) and then buy the Nov $82.50/$87.50 bull call spread for $2.
As of this writing, Tyler Craig held no positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.