Can the battered drug stocks rebound from new-low territory?
The U.S. stock market recently suffered a major pullback, as volatility surged. As such, Schaeffer's Senior Quantitative Analyst Rocky White compiled a list of the best stocks to buy after a major pullback -- defined as when the SPX falls at least 1% in two consecutive sessions within a month of an all-time high -- since the current bull market began in 2010. Two notable names from the list are biotech stocks Incyte Corporation (NASDAQ:INCY) and Celgene Corporation (NASDAQ:CELG).
A Short Squeeze Could Send INCY Higher
Incyte has actually been the best S&P stock to bet on after major pullbacks in recent years, gaining 20.5%, on average, one month out, and closing higher each time. It could use the boost, too, since it has been in a channel of lower highs and lows since late August, touching an annual low of $84.21 on Feb. 6. The shares settled at $86.34 on Wednesday, down 27% year-over-year. However, a 20.5% jump would put the equity back into triple-digit territory.
If Incyte does rally, short sellers could begin to cover, which could lead to tailwinds. Specifically, it would take short sellers almost a week to buy back the 8.1 million INCY shares they hold. Looking ahead, the company is scheduled to report earnings the morning of Thursday, Feb. 15.
Analyst Outlook Remains Positive for CELG Stock
Joining its sector peer among White's list of the best stocks to buy after big market dips, CELG stock has historically gained 11.7%, on average, a month after pullbacks, ending higher each of the last four times. Given the shares' current perch at $95.16, a move of that magnitude this time around would send them above the $106 mark.
Celgene has been poor on the charts of late, touching a three-year low of $92.85 on Tuesday. It has struggled to break north of the $110-$112 region since its massive double bear gap in October, losing 30% in the last six months alone. Most analysts have remained bullish, however, with 15 of 28 handing out "strong buy" ratings.