Here Comes Biotech Earnings: How to Trade Them
Last week, we had a rash of tech earnings that dominated the release calendar – highlighted by META Platforms Inc. (META) and Amazon.com Inc. (AMZN).
This week, biotech will take center stage – with names like Vertex Pharmaceuticals Inc. (VRTX), Amgen Inc. (AMGN), Eli Lilly & Co. (LLY), and Gilead Sciences Inc. (GILD) set to report.
Could this offer you a trigger catalyst to play a name such as VanEck Biotech ETF (BBH), which has their top three holdings as Amgen, Vertex, and Gilead?
Here’s why I believe the answer is “Yes”…
Last year, the entire biotech sector was a major laggard.
For instance, look at these returns….
Biotech: Major Laggard in 2023
- SPDR S&P Biotech ETF (XBI) gained only +7.6% in 2023
- iShares Biotechnology ETF (IBB) gained only +3.8% in 2023
- SPDR S&P Pharmaceuticals ETF (XPH) gained only +1.6% in 2023
As you can see, all of these top biotech funds severely underperformed the S&P 500’s gain of +24%. Why?
Fed Rate Hikes
Since so many biotech firms borrow capital for research and development – when the Fed is aggressively raising rates – money gets expensive – and cash-burning biotech companies get crushed.
But guess what?
Here in 2024, we’re expecting Fed rate cuts.
This could be the trigger for biotech to bounce back hard.
After a year of under-performance, the VanEck Biotech ETF BBH is now starting to poke above $168. If this can continue, and it stays above this year-long resistance level – that could be an early indication that higher prices are coming.
YOUR ACTION PLAN
Now that we’re entering into a Fed rate-cutting cycle here in 2024, this could offer biotech the time to shine. And with a series of high-profile earnings reports scheduled for this week, now could be the time to start that upside swing. After an under-performance in 2023, I fully expect a stronger 2024 – which is why I’m already starting to get my War Room traders positioned for a big biotech year.
If you’d like to join us inside The War Room to trade this biotech resurgence, you’re invited to join our elite trading community.
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MONDAY MARKET MINUTE
- Another Potential Oil Price Shock: If you connect the 2019 news flow with what’s happening now, then it’s reasonable to say another big price change is possible. Here’s the logic….
- Oil prices tend to trade with a “risk premium” – which increases or decreases based on geo-political uncertainty. Back in 2019, Iranian- backed forces attacked assets in the Persian Gulf, which impacted more than half of Saudi Arabia’s production. This singular event caused oil prices to spike 10% in one day. If you look at what’s happening right now, it appears like a similar playbook is playing out just like it did in 2019. Tracking.
- Running with the Deerevil: Caterpillar (NYSE: CAT) shares are indicated to hit an all-time high this morning after profits topped expectations – which should also be a signal that strength in John Deere (Nasdaq: DE) is coming as well. We could have a pair-trade in the works. More to come.
- Delta (NYSE: DAL) Has upside: In the midst of all the Boeing (NYSE: BA) uncertainty, it’s worth noting that Delta Airlines is the US airliner with the least exposure to Boeing aircrafts. They’re already Wall Street’s #1 airline stock, with 96% of analysts raying shares a “buy” – with the average price target around $54.00, which represents 35% upside from current levels.
- Tech Ready for the Next Level: Based on what we saw last week in the tech sector, its’ time to start looking at the next evolution in the technology arch – which leads to GitLab (Nasdaq: GTLB) and Snowflake (NYSE: SNOW). GTLB provides tools to coders – which is critical as AI advances at such a rapid pace. Snowflake is a leading cloud-based data platform – and both names will (in my view) lead the charge for tech going forward. Both names are ones to watch here in early 2024.
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