From the man who told the BBC that “Goldman Sachs rules the world”…
Most people right now are making a big mistake…
They are listening to the media and as usual they’re ignoring a huge investment opportunity.
The media so far has done a great job of scaring people about one type of stock. You’ve probably heard about it if you tuned in to the news.
Biotechnology stocks have been falling since February and right now they are down 40% since their peak. They may continue to fall further as investors do more panic selling in the weeks to come.
However, as I will show you, this will create for us another huge opportunity… as this sector becomes hated and cheaper to buy.
Take a look at this chart of the Biotech sector (XBI):
You will note 3 important things about the above chart:
1. Biotech stocks are still in a long term upward trend. Markets never move always in one direction. They go up, they pause, they retrace some of their previous moves and then they go up again.
2. The next big move is what we call the 5th wave. According to “Elliott Wave” theory, markets move in the direction of the major trend in 5 waves. Right now we are in a potential wave 4 which may complete at $100 (blue arrow).
3. This decline in biotech stocks is normal. Markets usually retrace about 50% (blue line) or 61.8% (red line) of their previous moves before bouncing higher.
Also notice the blue arrow on the chart. This level between $100 and $114 will play a strong support level where I expect XBI to find a floor.
If the level holds, Biotech stocks will be a buy. If it fails, then the long term uptrend is probably over.
I have been bullish on Biotech stocks since last year.
Take a look at this chart which shows how biotech stocks have done against US Stocks (S&P 500), gold and the UK market (FTSE):
You will see that we were right about buying Biotech stocks last year as they massively outperformed other markets (140% at their peak).
We were also right to sell them in March when they broke the short term uptrend line (see red line and arrow).
The right move now is simply to be patient and wait…
Good investing!
Alessio Rastani is a stock market trader at LeadingTrader.com. He is the self-proclaimed trader who shocked the world by declaring live on BBC News that he goes to bed “every night dreaming of the next recession” and that “Goldman Sachs, not the governments, rule the world”. He’s a controversial figure, not least because he’s a self-taught non-institutional trader with no FSA license. But he certainly isn’t shy about sharing his views. Do you agree with his words? (His words are his own and not endorsed by LondonlovesBusiness.com)
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