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The Killer B’s: Biotechs and Banks

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Biotech

Biotech shares are testing support levels, as measured by the NASDAQ Biotech ETF ($IBB) at roughly $336. The chart below shows how the ETF has been hugging that support line, and just how critical it is. A breakdown in the biotech sector would likely send the group lower towards $328, which is undoubtedly not a disaster, but it would be a bump in the road and suggest one of two things. Either the market is becoming risk adverse, or the money is rotating into another sector.

Celgene

The group’s struggles start at the top, with shares of Celgene ($CELG) struggling since the significant Morgan Stanley downgrade on October 5. For now, the stock seems to be finding support around $136.

Amgen ($AMGN)

Amgen shares seem to be showing signs of life again, after a small pullback.

Gilead ($GILD)

Gilead also doesn’t look in too bad of shape.

These three stocks, each have nearly an 8 percent weighting in the IBB ETF, and Biogen does too. The big four biotech stocks have roughly a 32 percent weighting in the ETF, so the group is likely going nowhere if these four stock do not get their acts together.

It likes they may be regrouping and getting ready for the next push up.

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The Banks

Financials seem to be benefitting the greatest, and the group is getting set to rise even further. The current trading pattern in shares of the Financial Select Sector SPDR ETF ($XLF) has a nearly perfect pennant /flag formation in it, which means that the ETF is likely to move higher, soon.

BofA

Bank of America has completely broken out and is now trading at levels not seen in nearly a decade. It may seem crazy, but shares of Bank Of America could be headed back towards $40, a rise of almost 51 percent from current levels around $26.50

Thematic Growth Investment Portfolio – IB Asset Management

Mott Capital Management uses a long-term thematic growth approach to investing in equities. We search for investments that both reflect and help to shape…

Netflix

Netflix may have found bottom too, after its post-earnings slump. It sure looks like it did.

Rates

Short-term interest rates are starting to rise, and that means the market is preparing for the next Fed rate hike. Three-month US Dollar Libor is at its highest level in nearly a decade!

Now the long-end of the curve needs to start to rise, and the banks will really be flying high.

…oh right, that is because there is no inflation…

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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

Mott Capital Management

Banks, Biotech, Netflix, and Rates