CBST Cubist Pharmaceuticals – Biotech Stocks Potential New Leaders

by Olivier on December 7, 2011

Current market action still doesn’t make me want to put on big positions or trade aggressively. That’s why I am spending a lot of time doing research, watching market related videos and why I do lots of scanning in order to find new ideas. One sector that is starting to provide some good looking charts is Biotech. Now that is easily the one sector I hate most and tend to avoid like the plague. Still, looking years or even decades ahead, there are compelling reasons to keep an eye on this sector. This could be one of the sectors that will power the next bull market. Personally I am closely watching everything related to Nanotech as I believe this sector has great potential as well.

I added a second Biotech sector overview chart to my public list in order to monitor various Biotech stocks going forward. As usual, I will get rid of weak stocks and replace them with stronger ones along the way. One stock that is starting to shape up would be CBST – Cubist Pharmaceuticals. As you can see its company name doesn’t feature the dreaded ‘Bio’, ‘Tech’, ‘Gen’ or ‘Gene’ component. Usually that’s the case with companies that sport a decent market cap, are already selling actual products and do have a decent pipeline of drug candidates.

Keep in mind though, no matter how good your due diligence might be, risk with these kind of stocks is great. Huge gaps in either direction are frequent. In those cases a protective stop loss won’t help. The only way to protect yourself is to go with small position sizes or to trade ETFs. FBT – First Trust Amex Biotechnology Index Fund comes to mind here.

My scans are starting to show lots of biotech stocks. I have the feeling the whole sector is still flying under the radar. The most prominent example that comes to mind that is responsible for the sector’s improving technicals is BIIB – Biogen Idec which has a market cap of more than 20 billion and has been a stellar performer. CELG – Celgene and GILD – Gilead Sciences two other high market cap plays are displaying multi-year sideways consolidation patterns that ultimately could break out to the upside.

To make a long story short, CBST’s weekly chart looks promising. After several years of orderly consolidation the stock broke out of the sideways trading range and has now formed a bullish ascending triangle pattern:

The weekly chart is not part of my list. Click here for an up-to-date CBST – Cubist Pharmaceuticals daily chart on my public list.

The following 2 charts offer a great way to monitor the whole sector’s performance going forward. Right now the following stocks are part of the list:

FBT – Biotech ETF, AMGN – Amgen, REGN – Regeneron Pharmaceuticals, IMGN – Immunogen, ACHN – Achillion Pharmaceuticals, ONCY – Oncothyreon, BIIB – Biogen Idec, Alexion Pharmaceuticals, Cubist Pharmaceuticals, ONXX – Onyx Pharmaceuticals, ARIA – Ariad Pharmaceuticals and INHX – Inhibitex.

Those who cannot change their minds cannot change anything. – George Bernard Shaw


Buenas noches!

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