Biotechnology
Biotechs rallied this week, a strong indication that “risk” is back after Fed Chairman Jerome Powell said interest rates would not be raised at this time.
This sector is the worthless stock sector – growth-seeking investors like to put money here when they believe a bottom may be in place.
I’m not an expert on why one biotechnology may be better than another, but I follow price developments and that’s what makes the group interesting.
The group’s bullish burst Friday came on a surge in volume, a sign (not a guarantee) that these stocks are regaining interest among those who believe the reward may now be worth the risk.
Biotech Price Charts: One ETF and 3 Stocks:
The SPDR S&P Biotech Exchange Traded Fund consists of 135 stocks, trades with a price-to-earnings ratio of 19 and at approximately 3 times book value. Considered a benchmark for the sector, here is the weekly price chart:
SPDR S&P Biotech ETF Weekly Price Chart, 11 4 23.
You can see how it peaked at $175 in early 2021 and now stands at $71.46, a drop of 58%. The ETF has seen a decent rally this week, but is still trading below its 50-day moving average (the blue line) and its 200-day moving average. Note that, so far, it has managed to stay above the mid-2022 low.
The daily chart for the SPDR S&P Biotech ETF looks like this:
SPDR S&P Biotech ETF daily price chart, 11 4 23.
Buyers have stepped up their efforts this week and the biotech benchmark appears to have bottomed – perhaps temporarily, at least – at $64. Note that the ETF continues to trade below its moving averages, even with this significant rally.
Ideaya Biosciences hit a new 52-week high, then pulled back. Here is the daily price table:
IDEAYA Biosciences Daily Price Chart, 11 4 23.
The Nasdaq-listed “clinical-stage precision oncology medicine” company has a market capitalization of $1.81 billion. Unlike many other biotech companies, the stock has been trading higher since late April and remains above the 50 and 200 day moving averages.
Olema Pharmaceutical is another Nasdaq biotech hitting new highs. The daily price chart is here:
Olema Pharmaceuticals Daily Price Chart, 11 4 23.
The company, based in San Francisco, California, focuses on cancer treatments for women. Note that the stock could have been purchased at $3 in April and is now valued at $16.59, an extraordinary gain in just 6 months. It’s moves like this that attract the “growth” investor.
Vertex Pharmaceuticals is working on treatments for a number of diseases, including sickle cell anemia. The Nasdaq-listed biotech has a market capitalization of $97.10 billion. The daily price chart looks like this:
Vertex Pharmaceuticals Daily Price Chart 11 4 23.
After the stock reached new highs this week, sellers took profits at the $380 level. As you can see, Vertex was trading at $286 as recently as March. It hasn’t traded below that bullish 200-day moving average since that month.
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