...and a Trader's Take

03/31/2006 12:00 am EST


Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

Also from the ChangeWave family, Bryan Perry offers the more aggressive service,The Tactical Trader, designed for those with a shorter time horizon, usually from weeks to months. The service's latest featured idea is also in a biotech bet.

"One sector that has shown a strong pattern of resiliency is biotech, with several stocks within the industry hitting new all-time highs. So, we know that when the market finds support, the biotech stocks will attract the momentum money. Being that most of these stocks in the biotech sector are story-specific, we can expect large swings and plenty of volatility. Nothing is more frustrating for a trader than calling the right sector and being in the wrong stock that doesn't participate. In particular, biotechs are a fickle bunch. This sector involves acute stock-picking, as any whiff of bad news can eclipse 20%-30% of equity values with little or no notice.

"Accordingly, I'm suggesting we take a different approach, by recommending taking a shotgun approach to the sector in a relatively new exchange traded fund. PowerShares Dynamic Biotechnology & Genome Portfolio (PBE ASE) is priced under $20 and includes all the hot names among its holdings. ETFs are essentially baskets of stocks within specific sectors that allow us the ability to cast a net over the sectors of our choice. This way, if money flows into a given sector, we can be assured of being in on that move.

"I like the approach the folks at PowerShares.com are taking in that they screen for the best companies within each sector and then weight the basket accordingly.
From a technical standpoint, shares of PBE have pulled back to support right here at the mid-$18 level. Since these shares went public back in July of last year, money flow into PBE stock has been very positive- indicating that higher prices are in store for the weeks and months ahead. My price target for the shares is $23, which appears very doable given the hot nature of the sector."

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