RE: Trying to understand22 Jan 2020 04:09
Well, not to burst anyone's bubble but there are distinct characteristics associated with US biotech stocks not usually seen with any other sector. First, as you all know, US bios tend to get rewarded handsomely for successful trials, NDA's, FDA special designations. The market tends to price in FULL success of a drug approval by FDA and it's estimated sales in most respects. That's why when you see any bios gets FDA approval for a drug, there is rarely any fanfare, or it even goes lower because it was already priced for that milestone. As you also know, if a trial fails, or it shows any adverse events, the market punishes that stock severely. Usually it's in the 30%-90% range depending on whether they will back up and refile, or whether they will abandon the drug altogether.
The other important point here is financing. The bigger companies with $1-$10 bil market cap tend to go higher when financing is announced. The mindset is that the money will carry their best prospect through to FDA approval. However, when a low capitalization stock does financing, it usually gets manipulated downward severely by short sellers screaming dilution.
The last important thing to remember. Biotechs very rarely care whether the market is up or down like the market. The pattern for the past year as the US markets continue to keep setting new highs is the biotechs are down overall. When the market sees profit taking, traders tend to move over to oversold biotechs.
The US Futures are up substantially tonight. That is good if you're in to tech stocks.
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