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How One Analyst Is Playing The Biotech Rebound This Week


It's been a good week for biotech stocks, with the industry posting its biggest gains in seven years.

Gilead Sciences, Inc. (NASDAQ: GILD), Biogen Inc. (NASDAQ: BIIB), Celgene Corporation (NASDAQ: CELG), Merck & Company, Inc. (NYSE: MRK) and Pfizer, Inc. (NYSE: PFE), all rallied, not to mention the iShares Nasdaq Biotechnology Index Fund (NASDAQ: IBB) is up 40 points in the last three weeks after a 27 percent drop to start 2016. 

All of a sudden, sentiment on the industry has started to shift.

Sean Udall, the Tech Stock Strategist and CIO of Quantum Trading Strategies, is one of the people who foresaw this recent run.

"I look for stuff like this," Udall said on Thursday's PreMarket Prep. "I basically look for the whole world at a moment in time when they just can't take anymore pain. It was a bottoming pattern. The other thing too, the IBB went to the 200 week moving average, that is extremely rare so that was a good signal."

Udall said he's been watching biotechs since at least mid-January.

"When I scan stuff and I see the average stock in the index isn't down 25 percent or 35 percent or 40 percent, but it's down 67 percent or 70 percent, like the energy sector was six weeks ago, at that point I almost don't give a crap what the level of the index is."

He continued, "When the average stock is down 67 percent or 72 percent -- it just got lunatic! Biotechs were probably the largest bubble on the planet when the IBB was at 400. It's almost like the bubble went completely full swing and as ridiculous to the upside that we got, we might have gotten as ridiculous to the downside for the average biotech stock."

He added there may be more selloffs in the index, but that there's definitely an opportunity in the next few days for good trades.

"It's just like anything else when people start getting excited about it again. I wouldn't be surprised if one of these names took people on a wild ride again and people go 'Oh my god I can't believe I bought bluebird bio at $51, I could've bought it at $38 and now it went back to 45.'"

PreMarket Prep co-host Dennis Dick added, "There's a lot of value there. You look at the multiples of some of these things, these companies are in all likelihood going to survive. You're in an aging population, it feels like it was just a great deal on a lot of these drug stocks here."

Listen to the full interview in at 34:52 in the clip below, and check out PreMarket Prep live every morning at 8 a.m. EST here.


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