Market Correction: Treasury Bond Fund is Trending Higher; Biotechnology Sector is at Oversold Levels and May See a Bounce Next Week

We noted in in the March 26 blog article that the sector rotation has intensified as we approach the seasonally weak April-May period. In the last two weeks the stock market sell off continued, which negatively impacted most equity mutual funds.

Long-term interest rates have also started to decline, which benefits the Fidelity Spartan Long-Term Treasury Bond Fund (FLBIX). The chart below shows the inverse correlation of FLBIX and interest rates (see $TYX, the 30-year Treasury Bond Yield Index on the top panel).

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The biotechnology sector corrected the hardest in recent weeks. However, technical indicators show now that we have reached an oversold condition and a bounce is likely in the coming week:

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Source: FidelitySignal.com

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Sector Rotation: Biotechnology Takes the Lead Again in 2014

The Fidelity Select Biotechnology Fund (FBIOX) was the best performing Fidelity mutual fund in 2013. The chart shows that the price of FBIOX consolidated in October and December, but started the new year with impressive gains.

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View the top 10 Fidelity funds at FidelitySignal.com

We’d like to point out that after the recent large gains the biotech sector is overbought now and ripe for a pullback. Investing in this sector carries above average risks, but can be highly rewarding for aggressive investors.

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Bullish Trends is Still Intact for the Fidelity Select Biotechnology Fund

The biotech sector was one of the hardest hit in the stock market sell-off today. However, the one-year chart of the Fidelity Select Biotechnology Fund (FBIOX) shows that the bull market is still intact. The chart also shows that corrections are normal, but to confirm the bullish trend, we would like to see FBIOX making a new high again in the next few weeks.

The reason for the importance of the biotechnology trend is that this sector has led the bull market of 2013. FBIOX turned out to be an excellent way to invest in the biotech sector, just as in past bull markets (e.g. 1999 and 2003). And just as in the past, market leading sectors (and the corresponding Fidelity mutual funds) making higher highs and higher lows were required to propel the broad market indexes higher.

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Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

 

Best Fidelity Mutual Fund of 2013: Select Biotechnology Fund

The S&P 500 index closed above 1,800 for the first time. The Dow also made a new high today, indicating a very bullish stock market.

The biggest gainer today was the biotechnology sector. The Fidelity Select Biotechnology Fund (FBIOX) was up 3.15% and continues to be the best performer of 2013 with an incredible 60.05% year-to-date gain. FBIOX shows a highly bullish chart pattern, since it broke through the blue resistance line.

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Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

The Biotech Sector is Hit the Hardest in the Market Sell-Off

Fidelity Select Biotechnology Fund (FBIOX, last change: -5.07%)

The stock market sold-off sharply today due to fears about the impact of the government shutdown and the stall of the budget ceiling negotiations in Washington. High flying sectors, such as Biotechnology and Internet were hit the hardest in the sell-off. The Fidelity Select Biotechnology Fund (FBIOX, last change: -5.07%) was down the most out of all Fidelity mutual funds.

 

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

Best Fidelity Mutual Fund of 2013: Select Biotechnology Fund is at All-Time High

Fidelity Select Biotechnology Fund (FBIOX, last change: 1.46%)

The Fidelity Select Biotechnology Fund (FBIOX, last change: 1.46%) has rewarded investors with a stellar 50.06% year-to-date return, which makes FBIOX the best-performing Fidelity fund this year. The bull market for the biotech sector started in November 2012 and has continued in 2013 with only one interruption in June. After the June correction FBIOX regained momentum and continues to make higher highs.

 

Buy/sell signals for Fidelity funds are available at FidelitySignal.com

 

Sector Rotation: Fidelity Select Biotechnology Fund

Fidelity Select Biotechnology Fund (FBIOX, last change: 2.07%)

The Fidelity Select Biotechnology Fund (FBIOX, last change: 2.07%) has made a new 52-week high yesterday. After the May correction the biotech sector stabilized in mid June, which was followed by a new market rally. In our view, FBIOX is one of the best biotech  funds available to investors, so we are not surprised that it outperformed other biotech mutual funds and ETFs during the recent volatile period.

Buy/sell signals for Fidelity funds are available at FidelitySignal.com