Greg Guenthner

Biotech buyouts are coming. But no one’s paying attention…

New record highs for stocks are instead sparking refreshed arguments from economists and analysts alike. They want to debate peak valuations or whether or not we’re entering a “Goldilocks economy” where growth is not too hot, not too cold—but just right.

But all of the debate about how hot the economy will run for the rest of the year is distracting you from a couple of critical developments in the stock market.

The first (and potentially most important) trend you need to watch is the biotech comeback.

You know the drill…

Earlier this year, biotechs rocketed higher. The sector posted 30%-plus gains during the first eight weeks of the year. Almost every single day, a different biotech would easily rise double-digits. And while this was an active trader’s paradise, these stocks did end up getting a little ahead of themselves.

But now, we’re seeing a strong resurgence in the biotechs. In just a few weeks, these stocks have gone from losers back to winners. As of this morning, the biotech sector is up more than 12% on the year, compared to gains of just 5.5% in the S&P 500…

SPDR S&P Biotech Index vs. S&P 500

Now, the buyouts are back. Yesterday, a small-cap biotech called Idenix Pharmaceuticals (NASDAQ:IDIX) jumped by 229%. ‬

Yes, in one day…‬

How did this happen?

Well, pharmaceutical giant Merck agreed to pay $3.8 billion to acquire the company in full. Not only did Idenix stock shoot way up– almost every small to mid-size biotech stock went up because of the Merck – Idenix acquisition news.

Regards,

Greg Guenthner
for The Daily Reckoning

P.S. According to our own biotech expert Paul Mampilly, we should see more market-moving activity like this in the near future. I’ll be giving readers of my Rude Awakening email edition all the details – including regular chances at real, actionable profit opportunities – as the story progresses. So make sure you sign up for the Rude Awakening for FREE today to see how you can trade these trends for huge gains…

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

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