High flying biotech sector shows signs of rotation

Biotech investors should be wary of the inevitable rotation of the industry. The iShares Biotech Index (IBB) is down 3.5% today on slightly higher volume. Money flow as been decidedly negative over the last three weeks.

The current price of $250 is testing support at its 10-week EMA. If it rebounds on robust volume then all is well.

Biotech's bull run began in early 2012.


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Comments (16)
  • chicagomary
    , contributor
    Comments (465) | Send Message
    what moving average is the EMA?
    21 Mar 2014, 10:57 AM Reply Like
  • Ian Farbrother
    , contributor
    Comments (288) | Send Message
    EMA = Exponential Moving Average, as opposed to the SMA (Simple Moving Average), which is normally the one quoted by default. In simple terms, the SMA gives equal weight to all periods in its range, whereas an EMA gives more weight to recent periods.
    21 Mar 2014, 11:43 AM Reply Like
  • chicagomary
    , contributor
    Comments (465) | Send Message
    Thanks you Ian. I knew about SMA but not EMA.
    21 Mar 2014, 11:46 AM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (9180) | Send Message


    Do you have an opinion on which is more useful & effective? I've known of both -- and EMA is much newer -- any opinions?
    23 Mar 2014, 11:55 AM Reply Like
  • dondfm12
    , contributor
    Comments (10) | Send Message
    Triple witching
    21 Mar 2014, 11:12 AM Reply Like
  • ceristeare
    , contributor
    Comments (1154) | Send Message
    Big bio better start buying small bio
    21 Mar 2014, 12:16 PM Reply Like
  • Bioalchemy
    , contributor
    Comments (181) | Send Message
    They just deserve it.
    21 Mar 2014, 12:37 PM Reply Like
  • Balanced Investor
    , contributor
    Comments (14) | Send Message
    Fair enough, if you are going to buy a sector instead of the best of breed individual equities. Just pick up some GILD or CELG, you would be better off
    21 Mar 2014, 01:56 PM Reply Like
  • Erik Levy
    , contributor
    Comments (53) | Send Message
    99% of biotech are pumped up reverse split jobs with marginal potential that is spun into the next great treatment option via SA or Yahoo! Finance articles. The folks that write these articles are already being exposed. GALE, CYTR to name a couple. There are dozens more out there, I believe, that have been hyped via similar methods. These methods walk the thin line of legality, as the people writing the articles are not directly or indirectly paid per se. It's sort of like laundering money, only they are laundering info via the major financial publications that are more than willing to publish their nonsense since it increases their traffic and therefore their dollars. I may get banned for this, but I don't care. I care about transparency, and this industry continues to be opaque.
    21 Mar 2014, 01:57 PM Reply Like
  • ceristeare
    , contributor
    Comments (1154) | Send Message
    Problem. How many clinical stage biotech companies are there now????
    1. Practice biospec diversity
    2. Buy it cheap (mkt cap vs potential future earnings)
    3. Chase the hype at your own risk.
    21 Mar 2014, 02:22 PM Reply Like
  • In_It_4_the_long_run
    , contributor
    Comment (1) | Send Message
    What is a good ratio to define cheap?
    23 Mar 2014, 09:00 AM Reply Like
  • Sittingcrow
    , contributor
    Comments (107) | Send Message
    Ask any friend or relative and they have at least five ailments. Go into anyone's bathroom cabinet and find at least ten current prescription drugs. People are living extremely long lives; most much longer than they *even want to*.


    There will be huge consolidation. Just one tiny discovery is everything- everything- for one small company. Many biotech companies of today will be part and parcel of huge drug companies of tomorrow. Don't know which ones so I buy funds & ETFs.
    21 Mar 2014, 05:03 PM Reply Like
  • gmanwicksy
    , contributor
    Comments (131) | Send Message
    This was due to the GILD usa government interference regarding pricing pressures, causing a ripple in the big names in the bio sector today. I agree with being long the small caps, more risk yet way more reward, esp if the big caps shave off another 5 10 percent. Option exp, 3witch didn't help either.
    21 Mar 2014, 10:30 PM Reply Like
  • The Long Tail of Finance
    , contributor
    Comments (1805) | Send Message
    22 Mar 2014, 04:52 PM Reply Like
  • larrymmm
    , contributor
    Comment (1) | Send Message
    Ultimately, earnings drive the stock price. The forward PE ratio for Biotech is somewhere around 25 -28, which is not unduly excessive. There are a lot of new drugs in the pipeline. The run up over the past two years has been based on fundamentals and earnings growth. This sector could continue to outperform for the next 5 to 10 years. Biotech is the new technology revolution.
    23 Mar 2014, 08:30 AM Reply Like
  • hja
    , contributor
    Comments (33) | Send Message
    GILD is typically flat in March & April... should pick up in May and rise through the summer until end September... refer to:
    23 Mar 2014, 12:25 PM Reply Like
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