Biotech stocks dropped again, but four reasons indicate that waiting remains the best strategy. Attitudes of investors appear not to have turned negative yet and, therefore, biotech stocks are susceptible to more selling.
The biotech sell-off, while possibly presenting trading opportunities, looks problematic for long-term investors. While an imminent collapse doesn’t look likely (see “Biotech Drop: Neither A Bubble-Burst Nor A Growth-Warning”), biotech’s extended rise looks over for now. This trend change is being called a loss of momentum to imply the uptrend basis was more speculative than investment oriented. Perhaps. However, many fundamental improvements have occurred, so, while traders and trend followers undoubtedly jumped aboard, fundamentals were a primary catalyst for much of the rise.
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