You can’t say that trading action in the stock market is robust these days, because there’s so much uncertainty in the global economy. But one sector of the stock market still offers big price moves, and you could argue it is highly uncorrelated to the broader market. This sector is biotechnology stocks—a group with strong institutional participation, where you can make big gains or lose your shirt in a hurry.
Over the years, I’ve noticed that biotechnology stocks benefit from rolling momentum. A stock might jump on FDA approval or good clinical results, but there can often be an “after news” price move as investors get to know the story a little better and pile into the action. Momentum or piggyback trading is a worthwhile trading strategy with biotechnology stocks. You can’t predict clinical results, but you can ride the news after they hit the wires.
On several occasions...
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