{"id":19514,"date":"2022-03-15T07:30:54","date_gmt":"2022-03-15T11:30:54","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19514"},"modified":"2022-03-15T07:30:54","modified_gmt":"2022-03-15T11:30:54","slug":"when-fundamentals-and-market-timing-line-up","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/when-fundamentals-and-market-timing-line-up\/","title":{"rendered":"When Fundamentals and Market Timing Line Up"},"content":{"rendered":"

By Eric Shamilov, analyst, Market Minute<\/strong><\/p>\n

No sector has been hit harder this year than biotech.<\/p>\n

In many ways, it has symbolized the bust in the overvalued areas of the market.<\/p>\n

The biggest example may have been Cathie Wood’s ARK Innovation ETF (ARKK).<\/p>\n

But if you compare ARKK side by side with the SPDR S&P Biotech ETF (XBI), they’ve been moving in lockstep for the last year.<\/p>\n

And as the market is trading at its lows – unable to shake off the constant flow of war headlines – a part of the biotech sector is starting to attract buyers.<\/p>\n

Let me explain…<\/p>\n

Back in December, we recognized that 2022 would be the year of the value trade…<\/p>\n

On December 10<\/a> I wrote:<\/p>\n

\n

Tech may be the biggest disappointment of next year… investors tend to become myopic right before a trend begins to unravel. But there needs to be a pin that pops the balloon, and it usually comes in the form of central bank policy… I think we’re finally heading into a golden age of value.<\/p>\n<\/blockquote>\n

The iShares S&P 500 Value ETF (IVE) has fallen only 5% this year, while the iShares S&P 500 Growth ETF (IVW) is down 18%. That’s a big difference.<\/p>\n

And XBI, as a whole<\/em>, has performed more like IVW than IVE – falling 28%.<\/p>\n

But XBI is not a concentrated portfolio. Meaning, even though all 188 stocks in the portfolio are in the biotech sector, their size, profitability, and valuations vary greatly.<\/p>\n

And at the current levels, some of the larger biotech stocks are starting to look very attractive.<\/p>\n

Take a look at this chart…<\/p>\n

\"Chart\"<\/div>\n

It takes the ten biggest stocks in XBI (which holds 188 total stocks) and compares it to the rest of the portfolio…<\/p>\n

Those are stocks like Moderna (MRNA), Regeneron (REGN), and Horizon Therapeutics (HZNP). Those ten stocks are actually up this month, while the biotech sector itself is down 10% and the S&P 500 is down 4.5%.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

From a price\/sales (P\/S) point of view, these top names have value. The average forward P\/S ratio of these top ten is just 6.4. That’s very reasonable for the high-growth biotech sector. Right now, that P\/S is at a 10-year low.<\/p>\n

It’s also interesting from a market-timing point of view.<\/p>\n

Take a look at this chart of XBI with its Relative Strength Index<\/a> (RSI)…<\/p>\n

\"Chart\"<\/div>\n

You can see that prices are diverging from the indicator… which means the probability for a reversal is rising (green arrow).<\/p>\n

I prefer to stick with the large-cap names within the sector. In fact, that’s a theme I’ll be playing all year.<\/p>\n

And with the big, anticipated FOMC meeting coming up tomorrow, a change in market sentiment might be all this sector needs right now.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Have you profited off the biotech sector? If not, will you be betting on the large-cap stocks now?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This sector has top names…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19514","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19514","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19514"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19514\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19514"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19514"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19514"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19514"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19514"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19514"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19514"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}