Biotechnology sector has a rare explosive day

Tuesday July 8, 2008 marked one of the most explosive upside days I have seen in the Biotechnology sector in quite some time. It comes at a great time when market sentiments are very negative and could lead to a little summer rally.

As the list below shows, both the BTK and NBI indices both had about a 3.8% increase in volume with convincing volume in the big biotech names. If a 3% down day is conisdered a crash, a 3.8% up day could qualify as an explosion! Some of these stocks went up even much higher thatn the average for the sector!


BTK, NBI, BBH, DNA, AMGN, GENZ, GILD, BIIB, AMLN, CEPH



In addition, there was quite a nice move in a lot of small and mid cap biotechs as well. The list below shows some of the names that I follow. I would be a little more careful about some of these smaller cap names as they could easily and quickly give back the gains they made today and more.

VRTX, HGSI, GNBT, IMCL, ALNY, PTIE, SGEN, VPHM, VRUS, RIGL.

Of course, one day does not make a trend. I am puzzled at the cause of this rather massive one day move in this sector. A short squeeze move is unlikely because the sector has not been down relative to other sectors. It is more likely that a sector rotation among big institutions has made investors realize the fundamental value that existed in the Biotech sector which I pointed out in my previous articles that can be found here.

Either way, this move could easily reverse itself unless we see more conviction via a sustained upward move over a longer period.

Bottom Line: Despite a potential profit taking sell-off in the next few days, this rally could have some potential to get the biotech sector to new highs.

JMHO.



Disclosure: The author has a long position in the biotech sector and therefor some of the stocks mentioned in this article.