Janet Yellen's comments to Congress Tuesday did wonders for biotech stocks, but not in a good way.
“Valuation metrics in some sectors do appear substantially stretched," said Yellen, "particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year."
The biotech and pharma industries were hit pretty hard after Yellen’s comments.
One stock in the general biotech arena, however, still seems to be holding its trend higher, and it's a very well-defined trend at that.
Related Link: 2 Biotech Stocks That Crushed On Earnings
The Company: Actavis, Inc.
Ticker Symbol: (NYSE: ACT)
Actavis is engaged in the development, manufacturing, marketing, sale and distribution of pharmaceutical products in the Americas, Europe, the Middle East, Africa, Australia and the Asia Pacific.
The company operates in three segments: Actavis Pharma, Actavis Specialty Brands and Anda Distribution.
Take a look at the one-year chart of Actavis with added notations:
Actavis has been trending steadily higher over the last year. Even with March's sell off included, the stock has continued to climb.
More specifically, the stock has been bouncing along a clearly-defined trend line of support since mid-April.
When Actavis pulls back to the trend line, investors and traders could look to enter the stock in anticipation of another bounce higher.
If the stock were to break its support, however, lower prices would most likely follow.
Related Link: 5-Star Biotech Stock Watch: Aegerion Pharmaceuticals
Actavis isn't set to release earnings again until August 8.
No matter what a trader's strategy, using protective stops can keep a person around for the next trade. Capital preservation is always key.
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