This column was originally published on RealMoney on April 24 at 11:03 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.

The entire biotech sector is sagging badly these days. It's underperforming the market at a time when the major indices are tagging multiyear highs.

It's unusual to see these intense growth stocks get left behind when a speculative wave hits the ticker tape.

Biotechs did very well in 2005. A deep product pipeline, genetic research milestones and cash looking for opportunities all fueled a strong rally.

However, the sector's biggest guns topped out in November and dropped into a nasty correction. Many have continued to decline into the second quarter.

Are these former highfliers nearing a significant bottom? Unfortunately, it looks like most biotech issues are still trapped in persistent downtrends.

On the flip side, a few mavericks are perking up nicely and could make a break for higher ground in the months ahead. And if you look hard enough, you might even be able to find a handful of biotech stocks challenging all-time highs.

The sector's malaise falls squarely on the shoulders of the group's three biggest names:

Genentech

(DNA)

,

Amgen

(AMGN) - Get Report

and

Genzyme

(GENZ)

.

These stocks have been under major distribution for months and all now trade below their 200-day moving averages. This suggests it will be months or longer before they fully recover.

Among this beaten-down trio, Genentech has the least technical damage, but it's nothing to write home about. The stock made a valiant recovery attempt after it released earnings April 11.

The stock failed badly and is testing its seven-month lows between $78 and $80. A breakdown here sets up a very attractive short-sale opportunity.

Gilead Sciences

(GILD) - Get Report

is at the other end of the biotech performance spectrum. This powerful stock is sitting at an all-time high after the latest leg of a rally that began over a decade ago. Notice how it's been moving higher in a parallel channel marked by deep pullbacks and powerful upthrusts.

Remarkably, this bullish pattern could become even more bullish in the coming weeks. Notice the very strong volume on the rally into channel resistance Wednesday. This could mark the first leg in an eventual upside channel break. This relatively uncommon setup yields major profits when price pushes above the channel in a vertical breakout.

Amylin Pharmaceuticals

(AMLN)

has been my favorite biotech play for over a year, but the time has come to issue a warning on this stock. Note how it broke out to an all-time high in late March after rallying above two-month resistance at $45, and then pulled back to test support.

On-balance volume broke out as well in the March rally but then failed the first time that price pulled back to support. This accumulation-distribution indicator bounced back to new resistance last week and then rolled over, even though underlying price is still holding the breakout level. This is a bearish divergence that predicts a major downside reversal.

Mid-cap and small-cap biotech stocks have been the strongest performers lately. But keep in mind, these speculative plays are dependent on news flow -- they will drop like rocks when research data don't support their buzz.

With this in mind, avoid middle holding periods like the plague. You can buy for the long haul after doing your homework and understanding the considerable risks, or you can jump aggressively into short-term price swings and take quick profits. But the hands-down worst way to play these biotechs is to buy impulsively on rallies and then get shaken out on news-driven selloffs.

Here are two mid-cap biotechs with very bullish price patterns.

New River Pharmaceuticals

(NRPH)

develops amphetamines and opioid analgesics. The stock rallied to an all-time high of $35 in February and pulled back to the 50-day moving average. It returned to the high in early April and rallied above resistance last week.

It's likely that options expiration drove the sharp pullback into support at the end of last week. If so, the stock could recover quickly and follow through with a rally above $36. Once it stabilizes at or near that level, look for the strong rally to continue to $40 and beyond.

Alexion Pharmaceuticals

(ALXN) - Get Report

specializes in treatments for hematologic and cardiovascular disorders, autoimmune diseases and cancer. This stock was a powerhouse in the first quarter, rising from $19 to $40 before topping out in March. It then pulled back in a bull flag pattern to the 50-day moving average, where it bounced last week.

This upside reversal could start a slow and steady run back to the March high. If so, the dips along the way will offer patient traders and investors good entry prices for an eventual rally over resistance and into new highs. The long-term chart suggests the rally could continue for a long time after overhead resistance is taken out.

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Alan Farley is a professional trader and author of

The Master Swing Trader

. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback;

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