Our Indicators Flash a Caution Signal Today
No Change in Portfolio Picks
If you are not at 10% cash in your biotechnology portfolio it is time to take profits or hedge your portfolio. If your biotech stock did not hit a new high last week you may want to sell it. Risk is rising and a red screen shows it. Although we expect another rally in the December/January time frame the sector has become frothy and overextended. Moreover, political dysfunction in Washington combined with an expected rise in interest rates in 2014 will limit upside in 2014. Here is where we are YTD:
The IBB (see chart below) is up 52% YTD. The XBI ($129) is up 48% YTD.
Our best picks have had huge moves YTD: Albany Molecular (NASDAQ:AMRI), Astex (NASDAQ:ASTX),Gilead (NASDAQ:GILD), Biogen Idec (NASDAQ:BIIB), Regeneron (NASDAQ:REGN), Pharmacyclics (NASDAQ:PCYC), and Seattle Genetics (NASDAQ:SGEN). All of these stocks are down today.
Our mid-cap index is very red today with many high fliers down 3% or more on good volume: Aegerion (AEGR $92.91) off 4.45%, Alnylam (ALNY $61.65) of 4.6%,Celldex (CLDX $31.60) off 3%, Incyte ($ 38.52)., Isis (ISIS $34.45) of 4.45%. Sarepta Therapeutics (SRPT $54.45) is up 1.83%.
The easy money has been made in 2013 and the bull market in biotech is now 4 years old. Stay with your core positions but get more defensive. Momentum is fading.
Disclosure: I am long GILD.
Additional disclosure: Long sector with FBIOX