Ishares Nasdaq Biotechnology (IBB)

This is a long-term theme. We are going to have a little bit of resistance at his initial target of $3.90. (Chart actually shows around $380. Did he misspeak? - Bill) There is some volatility with some pretty big swings.

He is very positive on the biotech sector. There had been a lot of negative news cycle during the election, so the sector consolidated for some time. He then got back in through this ETF in March. He just sold this, but only because of a portfolio rebalancing. A great way to play Biotech’s.

(Top Pick Jun 28/17, Down 4.04%) Season strength is June to September for Biotech. It is the ramp up ahead of cold and flu season. It broke a significance line and we are re-testing it. Momentum has come out of the name in the last three weeks. There is the continuous overhang of high drug prices in the US. If it cannot hold $300 then get out of it. It is no longer supported as a seasonal trade and he would get out of it.

The period of seasonal strength for biotech stocks is basically from mid-June to mid-September. The average gain for the NASDAQ Biotech technology index is about 8.17%, and has been positive 70% of the time since 1993. In this past week, it has broken out above the substantial trading range between $240 and $300. With the breakout, we can expect the magnitude of the range of about $60, to propel it to the upside by about $60, so the upside target is about $360.

A good time to Short? The one biotech ETF that he is really familiar with is this one. Most of the Short story is already built-in, so he would be reluctant to Short. Some of the names in this are doing okay, but some are at all-time lows. He would be reluctant to Short this.

Got into this couple of years ago, and it just never seemed to stop. Then it “stopped”. Now it seems to be stuck in a range and it is pretty close to the top of the range at almost $300. He loves the concept. There are going to be more demand for the products, and it is a real money maker.

All biotech shares are pretty volatile, and there have been some pretty big moves in the last couple of months. He expects this to run up and hit the high of $380, and then run past that. This is a generational change. Good space to be in long-term. 10 years and you should be very happy.

This space, along with healthcare in general, is in a secular long-term move, bullish in January and February with strong seasonality on a 5-year basis. It has been beaten up politically starting with Clinton, and we are not sure if that carries through with Trump. This is not for the faint of heart, but if you have a longer-term perspective, there is support at around $260, and if you get above about $300, there is probably going to be a bit of a break out. If you are looking to trade this, you would probably take a position right now. For a longer-term perspective, you may want to initiate a position now and see what happens with the new administration.

Biotech ETF. Institutions use this to trade. At Friday’s close we got closer to the 52 week lows. Hillary came out with a tweet about coming after the biotechs. He likes this long term for growth. He would be cautious here. No more than a third of a position. It could go 10 or 15% lower if she wins.

(A Top Pick Sept 4/15. Down 15.71%.) Clinton indicated she was going to do something about drug prices in the US, and this got whacked. In the last quarter or so, it is up 10%-20%, so it is working its way back.

He sees absolutely nothing wrong with being in the biotech sector. The fees are going to be low.

Has been a holder in the biotech industry at times through the post crisis period. In a post crisis environment, many of these types of industries tend to do really well. This one is aligned with the health boom and aging demographics. The biggest risk factor today is the US elections. Depending on your view of the US election and where the industry goes, it is a good hold longer-term.

Chart shows a nice jump from mid-June, and should probably continue all the way into November. He understands there are a lot of big health care conferences happening in September, October and November.

Using a 5-year chart, and looking at where the long term support is and their averages, this sector has broken down quite a bit. Wait and see what the new US administration does to this sector. It ran up tremendously for a number of years, and now we are in a correction mode. If Hillary gets her way, there is probably another leg down in this area. You could buy a half or a 3^rd just to be in there, because it has corrected significantly from the highs.

She likes Biotech’s. They are within the healthcare sector, and by far one of the more attractive industries. There is an enormous amount of double digit growth that we are still expecting from Biotech’s. They are trading rich, but that is because they are growing 2-3 times faster than the rest of the market. Sees this as a safe entry point.