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Biotechnology Bull Market Gets Second Wind To All Time Highs: ALR, GILD, ILMN

|Includes:ALR, GILD, iShares Nasdaq Biotechnology ETF (IBB)

Dow, S&P and Biotech Sector Hit All Time Highs

NASDAQ Still 1000+Pts Under 2000 High Levels

After a 10% sell-off in early October many large cap biopharmaceutical and diagnostic stocks are at new highs with the major indices at or near their October highs. The bellwether ETF IBB ($211.30) is flat after the index was closed for trading at mid-day because of a human error. The smaller PowerShares Dynamic ETF (NYSEARCA:PBE) has hit a new all time high at $36.10 with many of the same large cap biopharmas as its top holdings (and same picks by Rayno Life Science 3 years earlier) : Alexion (NASDAQ:ALXN), Biogen Idec (BIBB) , Gilead (NASDAQ:GILD), Illumina (NASDAQ:ILMN) and Regeneron (NASDAQ:REGN) all of which are near or at their all time highs. Although momentum has been easing in October the recovery in larger caps from the October sell-off has been impressive. The bubble talk has abated. Mid-cap high fliers have been more volatile and many are well off their all time highs and that is why we have said that trading smaller biopharma stocks without product revenues is only for full time traders. For example, Celldex (NASDAQ:CLDX), Clovis Oncology (NASDAQ:CLVS) and Puma Biotechnology (PBYE) are winners YTD but have not recovered to new highs. Ariad (NASDAQ:ARIA) and Infinity (NASDAQ:INFI) are losers YTD.

Also note that Bristol Myers (NYSE:BMY), Abbvie (NYSE:ABBV) and Pfizer (NYSE:PFE) have transformed themselves into biotechnology plays.

Our diagnostics portfolio will be reviewed in-depth as earnings are released over the coming weeks. Already many of our top picks are up considerably since Q3 earnings have been released: Alere (ALR $34.43), Cardiovascular Systems (CSII $29.40), Cepheid (CPHD $40.73), Illumina (ILMN $93.84), and ThermoFisher (TMO $98.36).

See full Rayno Life Science Portfolio here:

Rayno Life Science Portfolios July 1, 2013 Update | Raygent.com

In summary, investors should keep the following in mind when trading biotech stocks:

  1. The bull market seems to have de-coupled from the dis-array and political fighting in Washington but look out for an ObamaCare meltdown as the Affordable Care Act has been viewed as supportive to healthcare and pharma stocks.Track XLV ($53.27) up 33% YTD for impact. Cheap money from the FED remains a key macro condition.
  2. Large cap life science stocks should be core holdings. With a secular bull market taking the overall sector higher, ETFs and funds work well. Trading smaller and mid -cap stocks entails more risk and deep technical knowledge.
  3. We do not pick price targets although occasionally we will give sector timing calls on unusual moves and risk.Have a portfolio of stocks or ETFs not just a few. Overweight the portfolio with IBB or FBIOX. Have 10% cash for new buy ideas.
  4. Earnings and news flow in diagnostics sector remains positive. M&A still a driver.
  5. Technicals are a more important tool as we enter the 5th year of the biotech bull market.

Disclosure: I am long CPHD, GILD, PFE.

Additional disclosure: Long FBIOX Fidelity Biotechnology

Stocks: IBB, GILD, ALR