On a day where broad markets are correcting strongly we are on record forecasting a bullish second half of 2018 for biotechnology stocks. This is why we believe biotechnology stocks will outperform broad stock markets in the 2nd half of 2018.

Let’s take one step back. Biotech was the absolute stock market darling between 2010 and summer 2015. Since then the biotech index represented by the IBB ETF corrected 39%.

As always after such a long and deep retracement it takes away every bullishness among investors and media. Case in point: this recent bearish article on Bloomberg. Consequently, the vast majority of investors forget about this sector.

Interestingly, exactly at a time when ‘nobody is paying attention’ it is when the new bull market gets born. That’s the law of markets, and that’s when the minority of smart investors start taking long positions in a gradual and discrete way.

In January of 2018 we observed that the process we just discussed was taking place.In Biotechnology Stocks Bullish But This Is The Most Important Week Of 2018 we observed that magic was happening in the biotech space.

We wrote: “If the 112 level on the IBB chart holds strong next week it suggests the biotechnology space will continue its secular new bull market after it take a breather between 2015 and … this week.”

Since then, the biotech sector corrected slightly, but continued to trade in a tight range.

Interestingly, the chart pattern that is unfolding is a clear cup-and-handle pattern. This is a very powerful, and very bullish in most case, pattern. That’s why we expect to see this sector outperform broad markets in the second half of 2018.

(Click on image to enlarge)