A good lesson to learn from the action today is that the initial dips in an overbought market tend to be bought quickly. You don't have to be Sigmund Freud to understand the psychology here. The folks that have missed out or underperformed recently are afraid they will miss out again so they are quick to buy weakness.
In addition to that psychology there also is the inclination for many institutional investors to only buy weakness. The standard institutional approach is to identify a stock that has strong fundamentals and then look to build a position by reducing cost basis as much as possible. That means buying weakness rather than strength in most cases. When the market goes straight up, like it has the last couple days, that creates more fear of being left out and the dip buying is more aggressive.
That is a long-winded way of repeating what I wrote earlier - strong markets tend to stay sticky to the upside. They just suddenly fall apart. There is an inclination for bears to read too much into weakness which is understandable when you are on the wrong side of the market for too long, but selling like we have had today is more healthy than not.
I'm having good luck with a number of biotechnology names today and I'm contemplating PetIQ (PETQ) for an additional entry. PETQ had a big report and has been basing at its highs. I want to add to this going into the third quarter and am watching for entry.
On the biotech screen I'm liking action in Iovance (IOVA) , Sangamo (SGMO) , Serepta (SRPT) , Viking (VKTX) and Tocagen (TOCA) . The fact that speculative interest remains very high in the biotech group bodes well for the overall market.
