Technical Outlook: Bullish on Biotech

As investors know, the volatility that we've been having in this primary downtrend makes it very difficult to find solid investment opportunities.

It is true that in a bear market four out of five stocks will normally go down in price. In times like this it is often best to step back and look at some long-term powerful trends that may offer investors profitable opportunities over the long-term.

One area of the market that I continue to like is the biotech sector. As the Baby Boomers start to move into their golden years, the demand for new drugs for aging and health issues remain a key concern. That entices drug and biotech companies to pour money into leading research that could lead to a blockbuster that produces billions of dollars in revenue.

The new biotech bull market is also being driven by drug companies that have to constantly replenish reserves as older drugs come off a patent. That forces these large drug companies to search the market for new drugs, which many of the biotech companies have in the pipelines.

Many times if these companies fit into the large drug companies' business model they will buy the entire company. As the Baby Boomers continue to age, the search for new and alternative drugs will likely continue to accelerate this market in the long-term.

If you look at the chart the Dow Jones U.S. Biotechnology Index you can see it has been in a basing pattern over the past several years. The recent break out has left the index slightly extended, but any pullback near the top support line may be a buying opportunity in the sector.