Biotech's Resurgence: A Constructive Investment Opportunity, According to Piper Sandler's Craig Johnson

Market Technicals and Rotation

• 💡 The market is retesting important support levels, with the 50-day moving average being probed and then rallying intraday.
• ⚠️ A key observation is the deterioration in market breadth, with a weak number of new highs and stocks above their 200-day moving average.
• 🎯 Today's market action shows a rotation away from leading tech stocks like Nvidia towards companies like Nike and McDonald's, suggesting a shift.
• 🧠 This rotation is seen as a move away from the 'AI trade' and potentially towards a 'joy of missing out' (JOMO) for those who took profits.

Healthcare Sector Strength

• 🩺 The healthcare sector is showing signs of life, with downtrend reversals observed in names like Exact Sciences, Eli Lilly, and Merck.
• ✨ These healthcare stocks are seen as more constructive and are not experiencing the same rapid, straight-up gains as AI-focused stocks.
• 💰 This makes healthcare an attractive area to allocate capital, especially for out-of-favor areas showing signs of improvement.

Biotech's Comeback

• 🚀 Biotech is described as being 'back' and presenting a constructive place to invest money, with the IBB ETF reaching record highs.
• 📈 Several biotech stocks, including Gilead, Regeneron, and Amgen, are showing improving charts and reaching record highs.
• 🧩 Even smaller-cap biotech names within the XBI are forming significant multi-year bases, indicating strong underlying momentum.
• ⚡ A potential flow of money from AI trades into biotech is noted, offering a similar risk profile but potentially a better setup and less risky return.