The Strongest Group the Stock Market Has to Offer

You can’t say that trading action in the stock market is robust these days, because there’s so much uncertainty in the global economy. But one sector of the stock market still offers big price moves, and you could argue it is highly uncorrelated to the broader market. This sector is biotechnology stocks—a group with strong institutional participation, where you can make big gains or lose your shirt in a hurry.

Over the years, I’ve noticed that biotechnology stocks benefit from rolling momentum. A stock might jump on FDA approval or good clinical results, but there can often be an “after news” price move as investors get to know the story a little better and pile into the action. Momentum or piggyback trading is a worthwhile trading strategy with biotechnology stocks. You can’t predict clinical results, but you can ride the news after they hit the wires.

On several occasions in this column, we have looked at Alexion Pharmaceuticals, Inc. (NASDAQ/ALXN), which has been, and should continue to be, a stock market darling. This stock has a habit of going up, and it has proven to recover from every single pullback that it has experienced on the stock market. (See “One of the Best Areas for Profit in this Trader’s Stock Market.”) Alexion is a liquid biotechnology stock that’s a great stock for traders. The company only has one drug in the marketplace—but it’s in very high demand. The company’s stock market chart is featured below:




Chart courtesy of

Another one of many biotechnology stocks that are building momentum on the stock market right now is Ligand Pharmaceuticals Incorporated (NASDAQ/LGND). This company has a ton of news-flow, and investors like it. This stock bounces around quite a bit, but the company is doing all the right things with its drug development. This is a small-cap company that I think is going places. Ligand’s stock market chart is below:



Chart courtesy of

Biotechnology stocks are not for the faint of heart. Basically, I view the sector like precious metals or small-cap technology—all are risk-capital investments. One of the strongest stock market sectors over the last couple of years has been biotechnology stocks, and this is very evident in the NASDAQ Biotechnology Index, which has been a powerhouse wealth creator since 2009.

Government legislation has made drug development a little easier in the U.S., and this has helped biotechnology stocks tremendously. I don’t know where the stock market will end up this year, but I’m not expecting much. However, I remain fond of biotechnology stocks because of the strong institutional participation within the group, the positive industry demographics, and a solid outlook for the healthcare sector going forward. This is a stock market sector for disciplined traders. Right now, I’d say biotechnology stocks have the best trading action in the entire marketplace.