Markets

Seasonality Is Strong, Especially for Biotech

By Adam O'Dell  |  December 10, 2019

Did you know that November begins the seasonally-favored half of the year for stock returns?

I’m sure you’ve heard the Wall Street-ism, “Sell in May and go away.” It’s rooted in the stock market’s historical tendency to produce subpar returns during the six months between May and October, and above-average returns in the six months between November and April.

Historical “seasonality” tendencies don’t play out perfectly each and every time around, but stocks have certainly perked up heading into November this year!

In fact, the S&P 500 hit a total of 14 new highs between October 28 and November 27… ultimately boosting it 10% higher than its October low.

I don’t know about you, but I’m really excited to see what stocks are able to do between now and next April.

I know… there are a ton of risks and unknowns that could rightfully make investors hesitant right now. But both my 10X Profits and Cycle 9 Alert trading services are definitively in “bull mode,” stocks are hitting new highs (a sign of strength), and we’re just getting started in what has historically been the market’s best six months of the year.

As you may know, my 10X Profits model utilizes just one “super-charged” ETF to gain risk-on exposure to the equity markets — only when my model says it’s safe — and we’ve been in a long-the-market position ever since January 15 for 57% profits so far.

Meanwhile, my Cycle 9 Alert system is designed to identify the “hottest” sectors and industry groups at any given time, uncovering high-probability plays that are likely to outperform the market over the following two to three months.

Right now, we’re in a bullish play on Japanese stocks that’s up more than 80%. And we just got a new bullish buy signal on biotech stocks, just in time for the sector’s seasonable sweet spot…

Biotech Is the Place to Be Right Now

I know biotech stocks are on fire right now because they’ve been popping up left and right on the weekly hotlists I share each Wednesday morning with my Green Zone Stocks readers.

Some of the notable biotech stocks my system has alerted us to include:

  • Molecular Templates (MTEM) and Allakos (ALLK) are up 54% and 64%, respectively, since appearing on our 10/29 hotlist.
  • Recro Pharma (REPH) is up 16% since our 11/5 hotlist.
  • Avadel Pharma ADS (AVDL) is up 47% since our 11/12 hotlist, and Kodiak Sciences (KOD) is up 211%!
  • Prothena (PRTA) and Jounce Therapeutics (JNCE) are up 18% and 59% since our 11/19 hotlist.
  • Aquestive Therapeutics (AQST), Intercept Pharmaceuticals (ICPT), and Arvinas (ARVN) are up 7%, 9% and 14% in just the two weeks since our 11/26 hotlist.

It can, of course, be highly lucrative when you get it right on an individual biotech stock. And you can sign up here for my weekly Green Zone Stocks hotlists.

But if you’re also interested in making a diversified play on the entire biotech sector, an ETF such as the SPDR S&P Biotech ETF (NYSE: XBI) could do just the trick.

I recently ran a quick historical study on 20 industry-group ETFs and found that the biotech group is the most seasonally-favored of all.

Historically, buying shares of XBI on the 50th Monday of the year — which is this coming Monday — has resulted in average three-month returns of more than 8%. Have a look…

All told, my systems are continuing to identify bullish opportunities in this largely bullish environment. And now that we’re entering the year’s historical “sweet spot” of seasonality, we could see the market be ripe for a rip-your-face off rally to new highs.

The biotech sector looks like a great spot to be in right now. But I’m also uncovering new opportunities each week, all across the sectors…

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Adam O'Dell

As Chief Investment Strategist for Dent Research, Adam O’Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with minimum risk. He achieves this with his perfect blend of technical and fundamental analysis.

Tactically, he does extensive back-testing and probability-based research. It’s the ultimate partner to the exhaustive research that Dent Research co-founders Harry Dent and Rodney Johnson do in the exciting realm of the new science of investing.

Adam is also the executive editor of our hugely successful trading services, Rich Investors Club, Cycle 9 Alert and 10X Profits.

He has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high-profit potential.

Aiming to find the best opportunities across all asset classes, Adam expanded into the commodities, equities and futures markets. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. MORE FROM AUTHOR