What’s the market’s next move? It’s a question many investors wish to know. But when it comes to these three biotech stocks to buy, the price charts are ready to rally whether or not lockdown orders exist or not.
It’s a noble pursuit trying to stay one step ahead of the market. Maybe even more so given this week’s skittish behavior following a large rally that has taken the major indices back near all-time highs. Still, if there’s one sector with stocks to buy that’s able to withstand a bearish broader market cycle, biotech stocks definitely deserve mention.
Between an insatiable demand for a wide spectrum of drugs and new ones anxiously needed to fill a void like with Covid-19, there’s always good news and a bull market happening somewhere in biotech stocks. Bottom-line, taking the pulse of trillion-dollar influencers Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and others weighing on the market is a much less important side show.
- Crispr Therapeutics (NASDAQ:CRSP)
- Moderna (NASDAQ:MRNA)
- iShares Nasdaq Biotechnology ETF (NASDAQ:IBB)
Let’s hope for the best for our families, businesses, and market as we move through the fourth quarter and into 2021. But right now it’s time to look past an emerging second wave of Covid-19, lockdowns, election uncertainties and the like, and dive into healthy-looking price charts supporting biotech stocks to buy today.
Biotech Stocks to Buy: Crispr Therapeutics (CRSP)
Source: Charts by TradingView
The first of our biotech stocks to buy is Crispr Therapeutics. Shares of CRSP aren’t your typical biotech in need of a successful drug or two for success. Instead its fortunes rest within the area of gene editing.
Gene editing is a trend that’s just getting underway. And while some might fear the evils for this kind of technology like creating a Baby Einstein or two, CRSP’s mission is focused on combating serious disease.
Technically speaking, CRSP is looking very much the part of a rising star on its monthly price chart. The recent IPO’s shares have pulled back from all-time highs after a smaller base breakout. They’re also offering investors the opportunity to buy this biotech stock near the initial buy decision. With that pattern finding nearly perfect support from a much larger two-year corrective structure, the observation is CRSP appears all the more attractive.
It would have been nice to have spotted this biotech stock in early September like InvestorPlace’s Matt McCall as shares put that nice-looking bottom in place. Still, there’s no reason to cry over spilled milk when there’s an actionable entry like we have right now.
For roughly 5% to 6% stock risk, I’m favoring the January $110 / $130 bull call spread for a well-positioned blend of limited and defined risk with big-time, leveraged profit opportunity.
Source: Charts by TradingView
The next of our biotech stocks to buy are shares of Moderna. MRNA is almost a household name these days and much to the chagrin of the world at large. That’s because most of us would have no idea of Moderna’s work if it wasn’t for the coronavirus pandemic.
At this time Moderna is one of a handful still standing in the race for a Covid-19 vaccine. What’s more, The Motley Fool speculates a viable vaccine looks even more favorable for Moderna. They believe this biotech stock is one of only two companies positioned to meet the FDA’s authorization guidelines by the end of the year. The other candidate is a joint effort between Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX).
Technically, MRNA’s weekly chart shows shares are trading inside a 5-month corrective base-on-base pattern. Inside today’s ‘second wave’ the stock has just cleared September’s high of $75.39 while enjoying the support of a favorable stochastics setup that’s now trending higher out of oversold territory.
Now that’s actionable today. For long delta exposure, the April $95 / $115 bull call spread looks like a smart way to position for a Covid-19 booster shot off and on the price chart.
iShares Nasdaq Biotechnology ETF (IBB)
Source: Charts by TradingView
The last of our stocks to buy is the iShares Nasdaq Biotechnology ETF. For investors interested in diversifying company-specific stock risk among some of this sector’s top companies, IBB is definitely the way to do it.
Amgen (NASDAQ:AMGN). Regeneron Pharmaceuticals (NASDAQ:RGEN). Seattle Genetics (NASDAQ:SGEN). Biogen (NASDAQ:BIIB). They’re all heavily-weighted constituents and a who’s who inside of the biotech industry. I’m also a fan of IBB’s top ten holdings making up a full 50% of its portfolio and the solid liquidity in both the underlying shares and options market.
Technically, the monthly chart shows October’s price action has confirmed September’s doji candlestick. The net result is the decision candle is now a bullish low. It’s not a unique setup by any means. But as the pattern developed around this biotech stock’s former all-time high, which marked the start of a massive five-year long corrective base, this has the earmarks of a much larger bullish cycle just underway.
For positioning, I’m favoring the out-of-the-money March $150 / $165 call vertical in IBB. This combination allows ample time for a favorable resolution as shares eventually stage a breakout from today’s still-under-construction base.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.