While the broad market experiences its 7th week of losses, it’s no surprise that many sectors are feeling the pain. One sector I’ve been bullish on in the past has experienced quite a devastating bear market. I’m talking about biotech… 

We have been undergoing the worst Biotech market in the past 30 years, the biggest bear since the 90s. 

It has gotten so bad that biotech stocks are down 63% since they peaked early last year. In fact, Bloomberg recently reported that out of the NASDAQ Biotech Index, 86 stocks are trading for less than cash. That's right, 86 companies on the NASDAQ Biotech Index have more cash than their market caps... 

So, needless to say, this is exposing a great deal of value in Biotech after so much relentless selling over the past year and a few months. It's even worse when you look at the SPDR S&P Biotech ETF (NYSE: XBI), which is more diversified in smaller Biotech companies than the NASDAQ Biotech Index and is a little bit heavier in some of the bigger names.

So we've seen this pronounced sell-off in Biotech that started back in February of last year and it’s been running all the way up till last Tuesday when we saw a nice bounce off a very interesting support level here. 

XBI gained 5% last Tuesday, certainly a nice bounce off that $65 support level. 

We saw a similar experience during the COVID-related sell-off that hit stocks back in 2020. Investors then got excited about Biotech stocks since one of the lead stories involved all the Biotech companies working on vaccines and therapies to get us out of this COVID-19 crisis. Unfortunately, that enthusiasm waned, and the sector has sold off strongly since.

So now, following last week's bounce, XBI has traded sideways but remains a little above that $65 support level. Even sideways movement is better than the free-fall we’re seeing in the broader market right now. 

Does this bounce indicate that we’re heading for another biotech bull market? It’s tough to say, but I’ll be keeping my eye on things to see where we go from here. 

It would be great to see biotech stocks gain some steam to kick off a rally, only time will tell. 

To a bright future,

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