Anatomy of the Sell-Off in Tech Stocks
That MarketWatch report I mentioned covered such key technical-analysis points as trend lines, crossovers, and moving averages. Let me explain it to you.
The tech-focused Nasdaq started its slide in early March over worries about potentially slowing corporate earnings and economic growth. Pressure built over the next couple of weeks. By April 11, when the Nasdaq hit bottom, it had lost 8% of its value – much less than the 20% needed to qualify as a “bear market,” but still enough to sting.
Since that nadir, Nasdaq has enjoyed a stealthy rebound of more than 6% as more cash has flowed into tech stocks. The rebound has pushed that tech gauge up to a year-to-date gain of 2%.
And we believe there’s more to come.
Given this projection, we’ve created a near-term profit strategy focusing on what we view as the three best investing opportunities. These areas are experiencing good growth and strong business activity and are the focus of powerful-and-growing investor interest – all nice catalysts that should help us reap windfall profits in the weeks to come.
With that in mind, let’s take a look at the three tech investing strategies that will help you ride this market rebound.
No Doz Opportunity No. 1: Biotech
A good rule of thumb when considering where to put your money is to watch for sectors or companies that have taken a beating for reasons other than their innate fundamentals – otherwise known as “external events” in Wall Street parlance.
And when you find a good one, park your money there before “the crowd” realizes that a bit of investing injustice has been done.
Those “injustices” could have to do with politics, a media feeding frenzy, the misguided “pile-on” wisdom of crowds – or some combination of all three.
I like to call it The Noise.
That’s not just some neat little buzz term – it’s a very real tool that can lead to hefty profits. As my colleagues here at Money Map Press have heard me say many times, whenever you can “separate the signals (catalysts that are promising and real) from the noise”… you probably have a big profit opportunity right in front of you.
And biotechnology is a case in point.
The recent biotech sell-off is a classic example of a Wall Street overreaction to external events – in this case Washington politics.
Biotech stocks came under pressure when, back in late March, three members of Congress released a letter complaining that the cost of a new hepatitis C drug was simply out of sight.
Hepatitis C is a dangerous disease that, if left untreated, can cause serious liver damage and lead to liver cancer. It’s a condition that affects some 3.2 million Americans.
With a sticker price of $84,000 for a full regimen, Sovaldi from Gilead Sciences Inc. (Nasdaq: GILD) certainly sounds costly. But compare that with the $250,000 a liver transplant costs – and that cost doesn’t include the anti-rejection drugs that follow the transplant.
Once all the Beltway harrumphing ended, Gilead countered with stunning financial results that brought folks back to “investment reality.” That helped Gilead shares rebound – and gave a boost to the biotech sector, as well.
Sovaldi racked up $2.3 billion in first-quarter sales for Gilead. That’s a record for a new drug and smashed analysts’ expectations by $1 billion.