Biotech stocks look like new leaders
By Thom Calandra, CBS MarketWatch
Last Update: 10:33 AM ET Oct 16, 1998
SEATTLE (CBS.MW) -- Reality check? After the Federal Reserve bailed out the world by stripping basis-points from lending rates, investors are staring at a U.S. stock market that easily could turn south again.
Columnist and technician Leo Fasciocco tells me "the advantage goes to the bulls." But hey, it's not over 'til it's over. Right now, Fasciocco likes several biotechnology stocks.
"The Fed (interest rate) cuts get the fundamental credit," says Fasciocco, whose work appears in newspaper Investor's Business Daily. "The question now is: how far will the rally carry? No one knows for sure."
Fasciocco's daily Ticker Tape Digest correctly saw and recommended several utility stocks ($UTIL) "breaking out" of their trading patterns in August.
He says most smart investors make money by identifying market leaders, not sizing up the broader stock market.
"One has to watch the day-by-day action and look for any 'distribution,'" he says. Translation: if trading volume becomes very heavy a few days from now and the Dow falls or shows no gain, that's distribution -- a possible negative sign.
"The trick to spotting the top in the major averages is to follow the day-to-day action," he says.
More important are the directions of individual stocks. "The number of stocks breaking out of bases and making new highs are important to watch. These are the leaders."
Fasciocco, who will be at a stock-picking seminar in Seattle next week, says he is spotting "great tape action and technicals in the big profitable biotechs like Biogen (BGEN) and Genzyme (GENZ)." He also sees positive trends in the stocks of biotech service firms Parexel (PRXL) and Pharmaceutical Product Development (PPDI).
"The market is bullish now. Most people who were hurt by the prior decline are sometimes psychologically rattled and become hesitant about the market," he told me. "However, the momentum is to the upside." |
