For months, Wall Street has been trashing retail investors in biotech, depicting them as a bunch of rank amateurs who didn't know genes from genomes. When the bubble popped, investors who didn't know these companies would lose big-time, the reasoning went.

As always, though, the reality has proven to be a little more complicated. As the selling in biotech stocks slowed Tuesday, and a few leading names actually showed gains for the day, some much-maligned momentum players seem to have come out on top by selling at the lofty peaks. Of course, few would admit to being burned, but what was clear was that the legions of small traders took Wall Street by surprise.

"We knew what we were buying -- stuff that was going up," explains self-described momentum investor Joel Williams of Greenbelt, Md., who recently sold his biotech holdings in some

Janus

,

Rydex

and

Dresdner

funds. "When it began to go down, we sold. Something wrong with that? Personally, I think buying stuff that is going up and selling it when it begins to go down is called good trading."

No, Indeed

Now, with many biotech stocks well off their highs and many of the momentum players filtering out of the big names, Wall Streeters are crossing their fingers that maybe, just maybe, the biotech craze is past, and a return to traditional measures will follow.

After a 10% bath

Monday, the

Nasdaq Biotech Index

fell just 1.3% Tuesday, to 1101, with screens showing a bit of green after a tide of red ink in recent

days. The big biotech indices are now off some 30% from their highs of two weeks ago, though they remain substantially ahead for the year.

In Tuesday's action,

Incyte

(INCY) - Get Report

,

Celera

(CRA)

and

Amgen

(AMGN) - Get Report

all gained, recapturing some ground after recent losses. Still, the market continued to punish recent highfliers such as

Millennium

(MLNM)

,

Medarex

(MEDX)

and

TST Recommends

Protein Design Labs

(PDLI) - Get Report

.

New Breed

Typical of a new breed of New Economy investors, Williams, 64, is a computer engineer who says he has holdings of less than $2 million. He admits to knowing nothing about the biotech industry, yet was smart enough to sell out of biotech this month when the market turned. He didn't even call his broker for advice.

"The idea that we're supposed to go to

Merrill Lynch

or someone like that is just bull----," scoffs Williams.

People like Williams have changed the face of investing, in tech and biotech and all the other sectors. And with online investing more accessible to millions through cheap trading accounts and more personal wealth, the change is likely to be permanent.

Take Steve Bolich, for instance. A 38-year-old Denver resident who trades from his home, Bolich almost never looks to Wall Street brokers or analysts for tips on what to buy. In fact, he tries to avoid it.

"I try to find stocks that don't have any analyst coverage," says Bolich, a former

Lockheed

computer analyst who claims about $4 million under management. Without analyst coverage, he says, a stock is likely to be undervalued and could be a gem waiting to be discovered.

Bolich favors stocks such as

Atrix Labs

(ATRX)

,

Alkermes

(ALKS) - Get Report

and

Emisphere Technologies

(EMIS)

, all of which have posted gains in recent months and were solidly in the black Tuesday.

Back to Basics?

With people like Bolich and Williams avoiding big-name stocks in the biotech sector, the formerly overheated sector may be flattening out, much to the relief of those who favor value investing, meaning assessing the management and product prospects.

"The amateurs have lost their shirts, but the professional investors are smiling," says Steve Delco, biotech analyst with

Miller Tabak

.

Like many analysts and investors, Delco watched the Nasdaq Biotech Index zoom to peak at about 1600 in early March with increasing unease. With momentum investors indiscriminately piling into biotech stocks, the market had to turn, he says. The question is, when do you advise clients to sell?

"This was the closest thing to gambling, and people were just losing their minds," says Delco. "It's like, when the shoeshine boy give you stock tips, you know it's time to get out of the market. Kids of friends of mine were picking biotech stocks for their friends."

With the great biotech craze perhaps over, Delco hopes investors will take a more sober view of biotech and value stocks on traditional means, such as discounted cash flows and net present value -- though that may be a challenge with companies that typically have no sales or earnings.

Unfortunately, that may work for analysts, but not for momentum traders. For Williams, momentum investing is a bit like sailing. And wind doesn't blow from dry analysis.

"You can't trade on fundamentals," says Williams. "I don't believe in them."