Biotech has been one of the worst-performing industry groups this cycle. Investors have got used to it as these stocks have been dead money for much of the past decade.
While speculative growth and risk-on areas of the market are powering higher, biotech is stuck in the same range it has been in for years.
And, I know what you’re thinking. It’s the fundamental headwinds—an unfriendly administration under RFK Jr and elevated interest rates—but here we let price action speak.
And right now, the action is suggesting it's time to buy the biotechs.
The S&P Biotech ETF $XBI just cleared the VWAP anchored to last November’s post-election highs—a dynamic resistance level that has capped every rally attempt since.
As long as bios can stick the landing, the risk/reward in the short-to-medium term tilts to the upside.
I want to jump this breakout in anticipation of a primary trend reversal.
You can see a textbook multi-year rounding bottom when you zoom out.
We can use a 2-step confirmation process for scaling in or increasing exposure to the space.
The prior-cycle high VWAP around 91 is the first level.
The 38% retracement and pivot highs at 105 mark the ultimate confirmation that a new uptrend is underway.
I’m going to add more and more exposure as we take these levels out.
But I'm not doing it via the index. As usual, we want to express our thesis through individual biotech stocks… the ones showing relative strength and momentum.
Let’s talk about some of the leaders now.
Here’s our Biotech, Genomics, and Diagnostics leadership scan, sorted by distance to new highs:
This is a space where alpha can always be found, regardless of what’s going on with the rest of the market. But if the complex finally wakes from this long slumber, it will create an industry-wide tailwind… and picking winners will become easier.
When biotech moves, the leaders don’t crawl—they explode. We want to be ready to capture that surge.
We’re trading it with a nice mix of names along the cap scale… and of course, a few squeeze candidates:
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