Tripping Over Themselves to Buy Drugs

The XBI, ETF for the small and mid-cap biotechnology issues, is up an impressive 4% as I write this. Before rushing out to buy all biotech across the board, it is worth remembering this space had been relatively brutalized compared to the broad market since mid-November. So, a bit of a relief rally should not come as a surprise to being the new year and to reinforce the notion of a "January Effect."

As far as whether the rally has legs, we may look at the likes of BLUE as forming long-term base bottoms. Indeed, the jury is still out on that premature bull thesis, as we wold need to see several more sessions like today, at least, to begin to think that biotech is "back" as a momentum paradise. 

Nonetheless, we do like to keep tabs on relative strength names, or stocks which did not get drilled like plenty of biotechs which did in recent months. 

A name we have noted on this site and for Members previously has been the memorable Galapagos, a  Belgium-based biotechnology firm. 

On the updated weekly chart, below, note how steady the stock has been despite the XBI underperformance. Going forward, I would look at a name like this and perhaps NERV as relative strength plays within biotech to keep on watch if this XBI move proves to be just beginning of something larger.