Kyle Dennis FDA Insider Alerts Program | How to Filter for Biotech Stocks to Trade

Stocks still can’t seem to figure out whether they want to break out to new highs or revisit the summer lows…

However, traders remain hypersensitive to news headlines—causing a lot of back and forth price action.

During periods of uncertainty, I try to stay patient and focus on stocks that aren’t moving in the general direction of the market—companies that have catalysts so strong that they aren’t being dragged down by rumors and tweets.

For example, one of my bread-and-butter strategies involves trading catalysts in biotech stocks.

And it’s especially a great time to be trading them now.

Think about it…

…if you’re trading a small-cap biotech stock with an upcoming data presentation… do you think it would react to trade deal news or its all-important data release?

Exactly.

This news-driven market doesn’t look like it is ending any time soon, so I want to show you how to find and profit off high-probability setups that are not impacted by the trade war or other breaking news.

How to Filter for Biotech Stocks to Trade

When you hear biotech stocks — “too hard to trade” often pops up in traders’ minds…

… if that’s happened to you before, let me tell you one thing: you don’t need to have studied biotechnology or medicine in school to make money off these stocks.

In fact, I use a simple 3-step process to find my biotech trades… and today, I’m going to show you one of those steps — how to filter for these stocks to trade, as well as how I develop a trading plan.

The reason I love to trade biotech stocks isn’t the fact that it’s not really correlated to the overall market… but there is massive upside potential… on any given day, a majority of top-performing stocks will be biotechs.

Source: Finviz

So how do I go about stalking for these biotech trades?

Simple, there are two free tools I use all the time — Finviz and BioPharmCatalyst.

The first thing I like to do is get my stock universe down to a handful of names.

If you head to the “Screener” tab on Finviz, you can select some of the filters I used here:

Market Cap. — Small ($300M to $2B)
Average Volume — Over 500K
Industry — Biotechnology
Price — Under $20

We get down to about 40 stocks… not too bad, but to speed through these, I like to pull up the chart view.

That way, I can briefly look through for my favorite patterns and then get to the next step.

For example, Foamix Pharmaceuticals (FOMX) was one interesting chart that I saw the other day…

The stock was dropping, but approaching a key level — an inflection point.

What that signaled to me was, “Hey Kyle, let’s check this one out… and see if it has a catalyst.”

So what did I do next?

I went to BioPharmCatalyst to see if there was an upcoming catalyst event — something the stock could run up into, and allow us to take advantage of the bullish run higher.

… and whaddya know…

The company has an upcoming catalyst event on October 20, for its FMX101 treatment. You don’t need to know what that means… just that there’s an upcoming event.

So I included the stock on my October 8th FDA Insider Weekly Watchlist — I sent this out to my clients AHEAD of time.

Now, had you been a subscriber of FDA Insider Alerts… you would have been privy to that trade idea.

There was a clear buy zone.. And you could’ve taken advantage of that trading plan.

Look at what could’ve happened if you took that trade — using the catalyst run-up strategy.

The stock gapped up and made a move all the way to $3.13! The company announced it would present data at a conference… and the stock broke out — even though it wasn’t the “right” catalyst, we ideally want to get out before the big catalyst (which is on October 20)…

… and those who actually got into the trade based on my system would’ve taken profits around $2.90 — as that was the target.

This is one of the ways I’ve built my trading career… just focusing on biotech stocks that don’t necessarily move with the market…

… and I’ve simplified it to a point where anyone can trade the strategy…