Biotech – A Speculative Play for the End of June
ByThe biotech sector is often thought of as the poor cousin to the technology sector. Investors turn their interest to biotech when they want to be more speculative but do not want to invest in technology stocks.
Biotech stocks tend to outperform the S&P 500 from June 25th to September 13th. From 1992 – 2008, biotech stocks (XBI – SPDR Biotech ETF) beat the S&P 500 14 out of 16 times and had an average gain of 13.5%. During this time period the S&P 500 had an average gain of 0.1%.
The chart below shows that the biotech sector is lining up for a good trade once again. The sector is currently at long term support and has just broken through the 50 dma. The trades for the last three years are shown with green arrows for a buy and red arrows for a sell. Interestingly, despite the poor performance of almost every sector last year during the summer, biotech produced a healthy positive return.
The biotech sector tends to go up from the end of June until the mid-September because investors stake a position ahead of the autumn conferences that tend to provide a positive outlook in the industry. Positive returns in this sector would definitely be good medication in the current market.
