Biotech HOLDRS (AMEX: BBH) Hits The Skids Says Market Timer Frank Kollar
December 6, 2007 (FinancialWire) (By Frank Kollar)
Shares of the exchange-traded fund Biotech HOLDRS (AMEX: BBH) were advancing from a well-defined correction, and it certainly appeared they would continue to advance with the rest of the stock market, until Wednesday.
But Biotech HOLDRS, the widely traded biotech ETF, reversed hard on Wednesday, December 5 th, taking a one day 2.5% hit in share price, while that same day, the stock market rallied with strong gains of over 1 ½% on strong economic reports as well as hopes for a Fed rate cut of possibly ½% in coming days.
It was a news related event that hurt Biotech HOLDRS as an FDA panel rejected Genentech's (NYSE: DNA) oncology drug Avastin for the treatment of advanced breast cancer . Genentech lost almost 9% for the day.
We do not try to market time stocks, or any financial position, based on news events. Only if those news events cause a change in trend will we react, and in this case that did not occur. The new Biotech rally remains intact, though certainly Wednesday’s trading was an unhappy day for Biotech traders.
We advise giving this one a bit more time. News events can have dramatic consequences to shares of affected stocks, but tomorrow is another day and traders could just as easily look at the fact that Avastin is still a major revenue driver for Genentech and is already approved to treat colon and lung cancers, as a reason to buy up stocks that were expensive, but are now, maybe, a really good deal.
The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in Biotech HOLDRS .
Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.
Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.
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