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Did Biotech Just Bottom?
A beaten-down sector has a rare bright day.
Michael Comeau    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The two big biotech ETFs, SPDR S&P Biotech (NYSEARCA:XBI) and iShares NASDAQ Biotechnology Index (NASDAQ:IBB), are solidly in positive territory today and holding onto their morning gains quite well.

Last week, biotech tended to start the day well before selling off, culminating with an ugly close on Friday:



A solid close today would imply that a great deal of the froth has been worked off, which would make sense given that XBI fell 18% from its March high.

Interestingly enough, at its $136.47 low on Friday, XBI just barely crossed the 20% mark that some people call "bear market territory." I don't know about you, but 20% doesn't feel much different than 19% or 21%. Anyway...

It's also worth noting that on Friday Bank of America Merrill Lynch reported huge outflows in health care/biotech funds, which is indicative of real fear among market participants.

This morning, I took a long position in Gilead (NASDAQ:GILD) through a calendar spread, selling the weekly $73 call and purchasing the April $70 call for a $2.13 debit. Though the stock is up since I made the buy, I'm flat on the position as I bid a bit too aggressively. The ideal situation is Gilead finishing just under $73 this week (rendering the short call worthless) and powering higher next week. But I'll be more than happy if Gilead shoots past $73 and I'm called out on the long $70 call.

But what's really frustrating was that on Friday at 3:59 p.m., I scrambled to get an order in but failed. I was under the assumption that if the sector was to bounce, Gilead would outperform given that the recent Congressional inquiry into pricing doesn't seem like a real near-term fundamental issue.

Given its 20% decline off the top, I thought we could see sell-side analysts come out to defend the stock, helping the case for a bounce. I think that's still possible, but for now the stock is just moving up with its peers.

Editor's Note: Want to help improve the Minyanville experience? Take our reader poll and enter to win a $100 Amazon.com gift card.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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Position in GILD
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Did Biotech Just Bottom?
A beaten-down sector has a rare bright day.
Michael Comeau    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The two big biotech ETFs, SPDR S&P Biotech (NYSEARCA:XBI) and iShares NASDAQ Biotechnology Index (NASDAQ:IBB), are solidly in positive territory today and holding onto their morning gains quite well.

Last week, biotech tended to start the day well before selling off, culminating with an ugly close on Friday:



A solid close today would imply that a great deal of the froth has been worked off, which would make sense given that XBI fell 18% from its March high.

Interestingly enough, at its $136.47 low on Friday, XBI just barely crossed the 20% mark that some people call "bear market territory." I don't know about you, but 20% doesn't feel much different than 19% or 21%. Anyway...

It's also worth noting that on Friday Bank of America Merrill Lynch reported huge outflows in health care/biotech funds, which is indicative of real fear among market participants.

This morning, I took a long position in Gilead (NASDAQ:GILD) through a calendar spread, selling the weekly $73 call and purchasing the April $70 call for a $2.13 debit. Though the stock is up since I made the buy, I'm flat on the position as I bid a bit too aggressively. The ideal situation is Gilead finishing just under $73 this week (rendering the short call worthless) and powering higher next week. But I'll be more than happy if Gilead shoots past $73 and I'm called out on the long $70 call.

But what's really frustrating was that on Friday at 3:59 p.m., I scrambled to get an order in but failed. I was under the assumption that if the sector was to bounce, Gilead would outperform given that the recent Congressional inquiry into pricing doesn't seem like a real near-term fundamental issue.

Given its 20% decline off the top, I thought we could see sell-side analysts come out to defend the stock, helping the case for a bounce. I think that's still possible, but for now the stock is just moving up with its peers.

Editor's Note: Want to help improve the Minyanville experience? Take our reader poll and enter to win a $100 Amazon.com gift card.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in GILD
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
More From Michael Comeau
Daily Recap
Did Biotech Just Bottom?
A beaten-down sector has a rare bright day.
Michael Comeau    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The two big biotech ETFs, SPDR S&P Biotech (NYSEARCA:XBI) and iShares NASDAQ Biotechnology Index (NASDAQ:IBB), are solidly in positive territory today and holding onto their morning gains quite well.

Last week, biotech tended to start the day well before selling off, culminating with an ugly close on Friday:



A solid close today would imply that a great deal of the froth has been worked off, which would make sense given that XBI fell 18% from its March high.

Interestingly enough, at its $136.47 low on Friday, XBI just barely crossed the 20% mark that some people call "bear market territory." I don't know about you, but 20% doesn't feel much different than 19% or 21%. Anyway...

It's also worth noting that on Friday Bank of America Merrill Lynch reported huge outflows in health care/biotech funds, which is indicative of real fear among market participants.

This morning, I took a long position in Gilead (NASDAQ:GILD) through a calendar spread, selling the weekly $73 call and purchasing the April $70 call for a $2.13 debit. Though the stock is up since I made the buy, I'm flat on the position as I bid a bit too aggressively. The ideal situation is Gilead finishing just under $73 this week (rendering the short call worthless) and powering higher next week. But I'll be more than happy if Gilead shoots past $73 and I'm called out on the long $70 call.

But what's really frustrating was that on Friday at 3:59 p.m., I scrambled to get an order in but failed. I was under the assumption that if the sector was to bounce, Gilead would outperform given that the recent Congressional inquiry into pricing doesn't seem like a real near-term fundamental issue.

Given its 20% decline off the top, I thought we could see sell-side analysts come out to defend the stock, helping the case for a bounce. I think that's still possible, but for now the stock is just moving up with its peers.

Editor's Note: Want to help improve the Minyanville experience? Take our reader poll and enter to win a $100 Amazon.com gift card.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in GILD
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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