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 | | | 10 Blazing Biotechs Ripe for Pullbacks | | Matthew Carr | Chief Trends Strategist | The Oxford Club | | | The Perfect Income Investment?
Imagine a stock that pays you 100% income on your money every year... and continues to do so for the rest of your life.
$1,000 in savings would pay you $1,000. $10,000 would pay you an extra $10,000. $100,000 would pay you $100,000. And again, that's every year.
We never thought an investment like that would be possible... Until we saw this. |
| | | Editor's Note: A perfect storm is brewing in biotech...
Our good friend Marc Lichtenfeld, Chief Income Strategist at our sister e-letter Wealthy Retirement, has identified a powerful technical formation that he calls "Cat-5 Profits."
These potent catalysts led investors to take 146% profits in just two days... 2,381% in less than one year... and 5,850% in as little as four hours from a single trade.
So trust us - when one of Marc's "Profit Storms" hits, you'll want to be on the inside.
Click here to discover his top five ways to play the next Category 5 event.
- Rebecca Barshop, Managing Editor | | | | | There are few sectors more exciting than biotech.
The companies within it are pioneering breakthroughs and innovations. But that's not all.
Because these trailblazers are potentially revolutionizing new treatments or curing diseases, their shares are extremely volatile.
They can skyrocket on promising data and deals...
And tumble back to Earth just as quickly on bad results.
That's why, today, we're looking at overbought biotech stocks that may be flying too close to the sun.
Investors don't need to dig deep to find evidence of this.
Just look at the recent rise and fall of NextCure (Nasdaq: NXTC)... Shares blasted off a staggering 248.9%!
That was just a one-day gain! Investors nearly tripled their fortune in a single day.
But - as biotechs are known to do - it was all washed away.
NextCure shares imploded, losing more than half their value in a single trading session only a few days later.
But there were some warnings... | | | So with this Icarus-like scenario fresh in our minds, let's dig into overvalued biotech stocks based on their relative strength index (RSI).
This is an indicator we've used plenty here in the past. And just as a reminder, a reading below 30 is "oversold," meaning shares may be poised to pop. Whereas a reading above 70 is "overbought," meaning a pullback is likely.
Before NextCure's shares dropped, its RSI topped 92.
Here are some biotech stocks that may be flying too close to the sun right now... First, let me point out one thing: Shares of all of these companies are trading at or near 52-week highs.
They've enjoyed profitable runs. And as shares have soared, investors have chased after them, pushing them higher and higher into the stratosphere.
That means a great company can have overinflated shares, creating a dangerous air pocket when the winds change.
Right off the bat, we see Constellation Pharmaceuticals (Nasdaq: CNST) has a blistering RSI reading of 90.43.
And it's no wonder...
Shares set a new 52-week high on November 6 as they blasted off more than 200%. They eventually ended the day up a mere 95%.
And shares haven't really slowed down since. But that RSI level is warning enough for investors to not chase the stock.
Next, BeiGene Ltd. (Nasdaq: BGNE) shares hit a new 52-week high on November 8.
Shares have been on a tear since Amgen (Nasdaq: AMGN) (No. 9 on our list) announced it was taking a 20.5% stake in the company for $2.7 billion at the end of October. This ignited a fantastic run, though shares are now above the $174.85 per share that Amgen paid.
Then we have Deciphera Pharmaceuticals (Nasdaq: DCPH) with an RSI of 84.74.
Shares have been flying higher since August when the company's gastrointestinal stromal tumor treatment, ripretinib, showed exceptional data in a trial. The reward for investors early into the play was an 80% jump in a single day on the news.
For most of these biotechs with sky-high RSIs, the story could be repeated again and again.
Over the past month, shares of these blazing biotechs have gained a minimum of 10% and a maximum of 287.9%.
Now, investors may have missed the boat on these massive, potentially life-changing runs. But that's OK... there will be other highfliers in the days ahead.
The important thing to remember is not to chase shares higher. Someone is always buying at the top, driven by the "fear of missing out."
Unfortunately, that's one of the most dangerous mistakes an investor can make.
And this is why a simple indicator, like RSI, is useful to have in your investing tool kit. It's like an early warning system for those stocks flying too close to the sun.
Because no matter how great a company might actually be, your fellow investors may have propped it up with wax wings.
Here's to high returns,
Matthew
P.S. When it comes to lucrative new opportunities in medicine - particularly ones that are UNDERVALUED, we look to our friend Marc Lichtenfeld. Marc is a healthcare investing expert and the strategist behind our sister e-letter Wealthy Retirement.
Recently, Marc uncovered a powerful signal that indicates when a small cap company is preparing to take the market by storm.
Last year, this catalyst - which Marc calls "Cat-5 Profits" - led investors to score gains of up to 50 times their original investments.
Click here to learn how you can net profits of $50,000 or more the next time one of these storms hits.
| | | | |  | | | | | |  |  | | | | Matthew Carr | November 11, 2019 Every burgeoning industry suffers from growing pains. And cannabis is growing faster than any other. Read More | | | | |  | | | | Matthew Carr | November 7, 2019 PharmaCielo is expected to enjoy an exciting and transformative year in 2020. Read More | | | | |  | | | | David Fessler | November 6, 2019 Three elements are disrupting the way we generate, use and store electricity. Read More | | | | | | | | |
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. 
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