The parabolic move in biotech stocks is in a frenzy as hedge fund managers try to generate return to close out 2017. Every morning there is a new story out on select biotech names from drug approvals, FDA data, upgrades, downgrades, and merger activity. The data is excessive! To gain knowledge of the field I joined a chat full of doctors and professional biotech traders. But I don't feel comfortable trading individual biotech stocks... Why? Because I have played these select names and saw my P&L get cut in half as a woke up one morning with the stock crushed!
Most traders think of playing the biotech ETF's like XBI and IBB to play the biotech rally. These are the corresponding ETF's making up smaller cap biotech stocks in XBI and larger cap biotech stocks in IBB. These help reduce single stock risk of a specific biotech name to help volatility decrease. Another way to play the biotech rally is by playing the NASDAQ through binary options. This cuts your risk to a greater degree as approximately a quarter of the NASDAQ movement is in biotech / healthcare stocks. To name a few individual stocks : CELG, AMGN, BIIB, REGN, and VRTX
Looking at the chart of these names relative to the Nasdaq as biotech stocks are not at all-time highs like the Nasdaq therefore they could potentially play catch up sending the Nasdaq higher. (Chart below of XBI Biotech ETF from TD Ameritrade)
The XBI is currently trading a couple points away from the high. As the Nasdaq Futures trade at all-time highs (Chart from TD Ameritrade). Analyzing the trend using our own proprietary Dynamic Trend Indicator, you can see both the NASDAQ and XBI are bullish using the multiple time frame analysis study. The other technical factor I use is the Dynamic Trend Wave with price above the wave indicating a bullish trend.
The advantage of trading binary options in the NASDAQ limits the risk of the trader. As a trader the worst feeling is the feeling of uncertainty. Waking up at night to check a symbol, stressing out hoping a position will go in your favor, and looking in the mirror to more gray hairs! Trading should be a fun enjoyable process!