How One Analyst Is Playing The Biotech Rebound This Week

It's been a good week for biotech stocks, with the industry posting it's biggest gains in seven years yesterday. Gilead Sciences, Inc. GILD, Biogen Inc. BIIB, Celgene Corporation CELG, Merck & Company, Inc. MRK, and Pfizer, Inc. PFE, have all rallied, not to mention the iShares Nasdaq Biotechnology Index Fund IBB is up 40 points in the last three weeks after a 27% drop to start 2016. 

All of a sudden the 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, and he explained on Thursday's PreMarket Prep how he saw it.

"I look for stuff like this. 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% or 35% or 40% but it's down 67% or 70%, like the energy sector was 6 weeks ago, at that point I almost don't give a crap what the level of the index is. When the average stock is down 67% or 72%-- 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 that there may be more sell offs 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, Inc. BLUE 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 osf some of these things, these companies are in all likliehood 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.