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How To Trade Biotech Stocks: Can These Three Tips Help You Make More Profits?


With hundreds of companies forming IBD's biotechnology industry group, investors naturally seek big profits in the ever-dynamic space. And why not? Huge breakouts and five-, tenfold moves by the likes of Amgen (AMGN), Biogen (BIIB), Celgene (acquired by Bristol Myers Squibb (BMY)), Genentech (acquired by Roche (RHBBY)) and Regeneron Pharmaceuticals (REGN) have become Wall Street lore.

But are there some practical tips to help you consistently make money in the stock market — especially in this volatile field of industry? Consider three.

Tip No. 1:
Try a scattershot approach. Buy a highly liquid exchange traded fund such as the SPDR S&P Biotech (XBI) ETF. It ranks among leading ETFs tracked by IBD. Want more juice? ProShares Ultra Nasdaq Biotechnology (BIB) seeks to deliver twice the return of the Nasdaq Biotechnology Index. One big problem: It can crush your portfolio during steep market downturns. So, be disciplined with timing. Buy only when you see a follow-through day after a bear market. The Big Picture can help in this regard.

Tip No. 2:
The best companies deliver the most shareholder value by creating a product that radically changes the face of medicine. Amgen revolutionized patient care in chemotherapy. Celgene addressed tough diseases with its own discoveries. In 2021, we're seeing the fruits of messenger RNA technology leading to the rapid development of Covid-19 vaccines.

You don't have to grab shares in huge winners by trying to pick the bottom. Instead, look for companies that form good bases that signal heavy institutional accumulation.

Tip No. 3? Marc Lichtenfeld, an expert in biotech and income stocks, notes that a lot of Wall Street money moves into companies that issue positive Phase 2 clinical trial data. Such news can spark big breakouts and solid price runs over the span of months or a few years. But few companies succeed as well when they get to Phase 3 of a drug trial.

https://www.investors.com/how-to-invest/investors-corner/how-to-trade-biotech-stocks-three-tips-help-make-more-profits/