I don’t like to blow my toot my own horn. Wait, come to think of it, actually I do. The problem is that I just don’t get the opportunity very often. The truth is that I am just not very good at “predicting” things. Fortunately, being a trend-follower – or more often a “buyer on a dip in an uptrend”, my shortcomings as a “visionary” aren’t the end of the world.
(See also: Out With the Old, In With the, Uh-Oh)
Still, if you pay close enough attention to the markets eventually you can sort of get a sense when history is repeating. And every once in a great while – and admittedly in this case, by sheer coincidence – you get one exactly right. In this article, dated 7/17/2015, I noted that the biotech sector appeared to be was experiencing a blow-off top – similar to, if not even more extreme than the 1998-2000 blow off top.
As you can see in Figure 1 below, the date of that article just so happened to coincide with the exact day that Fidelity Select Biotech topped out. From there FBIOX plunged -48% in 7 months. Even today – and despite new highs by most of the major stock market average – FBIOX languishes -38% off of its July 2015 high.Figure 1 – Fidelity Select Biotech(ticker FBIOX)
So does this mean that I am capable of calling tops and bottoms with uncanny accuracy? Har. (Pssst, and the truth is there is no one who actually can). What it does mean is that – at least on occasion – I may have the ability to identify a high risk area for a given security. Turns out that’s a pretty valuable skill to develop.