I love trading biotechs…
Maybe it has something to do with me studying biology in college and once having aspirations of becoming a doctor.
Maybe it’s because biotech stocks offer more explosive returns than any other sector in the entire stock market…
I’m not kidding!
If you look at the largest pre-market gainer this morning it was Zogenix (ZGNX), the stock was up almost 30% in the pre-market after it was announced that it secured FDA approval for resubmission of its seizure drug application.
Now, to the untrained eye this all looks like gibberish. However, trading off FDA announcements is my bread and butter. In fact, my flagship service, FDA Insider Alerts is focused mainly on trading around FDA catalyst events.
Like this one in BioPharmX from earlier this week:
Again, that might read like gibberish to you, but I can teach you how to decode this information and turn it into profits.
Just like Brian is doing:
(FDA Insider Alerts is my flagship service, and now for a limited time, you can receive it at an 80% discount, click here to join now)
And the best part is…
You’ll start recognizing the same repeatable patterns that I do, and in no time, be profiting off these opportunities too.
But before you start trading biotech stocks it makes sense you get familiar with the sector, and see how it works.
You see, there’s one group that controls the entire sector, and if you don’t know how they operate, then you’re going to have a lot of trouble making money on biotechs.
Wherever you go, it seems the term “FDA Approved” is all around us… whether it be foods, dietary supplements, pet foods, cosmetics, etc… it’s clear the FDA does a good job at regulating consumer products.
Now, if you don’t already know, the FDA is short for the U.S. Food and Drug Administration (FDA).
Not only does the FDA regulate many consumer products… it also regulates the health care industry… and understanding the role of the FDA can uncover a lot of trading opportunities.
You see, the FDA is responsible for protecting public health and help to ensure the safety and efficacy of treatments.
Why is this important to our trading?
Well, biotechnology and pharmaceuticals stocks are included in the health care sector… and the FDA affects them.
How the FDA Affects Biotech and Pharmaceutical Stocks
Basically, biotech and pharmaceutical stocks provide treatments for various illnesses and diseases. Well, before these actually hit the market… there’s a long process that deals with testing… and if those prove to be safe and have efficacy… then the FDA may look to approve them.
Well, in a way the FDA protects consumers… and also creates opportunities for traders.
You see, there are various phases of treatment testing, which are labeled Phase I, Phase II, and Phase III…
… at the conclusion of each trial, the company releases results… and there’s a trade around that.
There’s an entire process that companies must go through if they want to market their treatments in the U.S… and there are multiple trades around these events too.
The bad news: if you didn’t study biology, biotechnology, or another field in medicine… it’s often hard to figure out what’s going on with the FDA Approval Process.
The good news: you can learn what moves biotech and pharmaceutical stocks… and no you don’t need to memorize all these difficult-to-pronounce treatments.
Not only that, it’s simple to find trades once you know what to look for and understand how the FDA works. Moreover, a lot of this information is made public… so you don’t have to go looking for all this data when you’re researching these stocks.
I look through all these stocks to see what’s interesting and where a company is in the approval process.
Not only that, I’ll use Finviz to scan for chart patterns in biotechs I like.
For example, if you go the the “Screener” tab in Finviz, you can select the industry, then price and volume.
With this filter, I’m looking for biotechnology stocks trading under $15 a share with an average volume of at least 750K.
Basically, we’re looking for biotech stocks that are liquid.
Now, once I filter for these stocks… I’ll quickly scan through these charts and look to see whether there’s a pattern I like.
Thereafter, I’ll figure out where these stocks are at in the approval process.
Once I’ve found my best setups, I let FDA Insider Alerts clients know exactly what I’m watching and provide them with a detailed watchlist.
For example, stock that was on my watchlist was BioPharmX (BPMX)… and there was a detailed trading plan.
Now, once the stock got to my buy zone… I alerted clients about my moves.
In just about a month’s time… I was locking in 50% on the trade.
How was I able to spot this winner?
Simple… I understand how the FDA Approval Process works… which is very complex for beginners if you’re trying to figure it out alone.
However, when you have someone to learn on who knows how the ins and outs of how the FDA works… it becomes a lot easier.
My clients actually nailed this trade too. Heck, some even had better returns than I did.
Well, I broke down the FDA for them and taught them my simple-to-follow strategy… and revealed the entire FDA Approval Process, allowing them to spot these winners as well.