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Bio-Tech Stocks Are Oversold, But They Haven't Bottomed Yet

|Includes:AMGN, CELG, GILD, iShares Nasdaq Biotechnology ETF (IBB), VRTX

One of the hottest stock sectors in 2013 was the bio-technology stocks. Leading bio-tech stocks such as Celgene Corp (NASDAQ:CELG), Gilead Sciences Inc. (NASDAQ:GILD), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Amgen Inc (NASDAQ:AMGN) were some of the biggest winners last year. So far in 2014, this high growth industry group has been in correction mode. Many of the leading bio-tech stocks are now trading lower by 20.0 percent or more since the start of the new year. While it is safe to say that the bio-tech sector is severely oversold, this important industry group has not yet bottomed out.

Traders and investors can expect minor bounces in the bio-tech stocks from current levels, but it is not a true bottom in the industry group just yet. Remember nothing in the stock market goes down or up in a straight line. One of the ways that traders and investors can play the entire bio-tech sector is to use and follow the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB). At this time, the IBB is signaling downside to the $202.00 level. This is an area where the institutional money will likely come back in and support the bio-tech stocks, until then the bounces in the sector are likely to be just small rallies from an oversold condition.

Nicholas Santiago