It’s been a pretty tough week for stocks so far… Even though we did see a bit of a bounce this morning, it appears to be fading as the day goes on. 

Right now, the main reason for all of this is inflation. We got some pretty hot numbers on Friday which sent the market lower and we’re seeing that sell-off extend into this week as well. 

However, there is one sector I like to look at when the rest of the market is red like this. Biotech! 

It all has to do with catalysts.

When you get a positive catalyst in a biotech company, something that surprises the market like a surprise FDA approval, or strong clinical trial results, the stock can go up dozens, even hundreds of percent in a single day. 

Another thing that can often happen for a biotech company to buck the general market trend is a buyout catalyst. This is where a biotech company gets bought out at a much higher valuation than it was trading at the night before.

Thanks to this phenomenon, there are a plethora of biotechs to look at that have the potential to buck the general market trend.

So while the market sorts out its feelings about the Fed’s tightening monetary policy, we can look to biotech to go against the grain of the broader market. 

But with so many biotech names out there, it’s tough to pick exactly which one has the potential to rocket higher off a positive catalyst.

Especially at times like these where money is tight, you have to be careful what kind of biotechs you pick. 

For starters, you want to pick biotechs that have lots of cash and don't have to raise cash anytime soon. This somewhat relates to the Fed's tightening because raising cash right now is more difficult than it was a couple of years ago.

You can also look to the SPDR S&P Biotech ETF (NYSE: XBI) for some clarity. The XBI is very rich in small-cap biotech stocks and is sitting at the support level it bounced off of back in May. 

In fact, this support level goes even further back to the lows that we saw at the height of the Covid-19 pandemic. 

So, it’s entirely possible to beat the down market with biotech. But you must keep a watchful eye out for important catalysts and support levels.

Of course, I’ll be sure to write about any exciting news or developments that I see while doing my research.

To a bright future,

Ray Blanco
Chief Technology Expert, Technology Profits Daily
AskRay@StPaulResearch.com