The Dotcom bubble and the housing bubble can still send shivers down the spines of those who lost big in the stock market.
And now we could be on the verge of yet another bubble ready to burst and bring down the market alongside it.
This is what you need to be watching out for, and how seeing this signal first could save and make you thousands…
When we think of a bubble bursting, we usually imagine the violent pop that immediately causes something that was inflated to practically vanish. And when a bubble on Wall Street finally pops, it can easily be your money that vanishes…
But that doesn’t have to happen.
There are always signs that warn you when a bubble is preparing to burst, and identifying those signs can make a difference of thousands upon thousands.
So what’s the bubble that could kill this bull market?
The Biotech Bubble.
You may remember roughly a year ago when the biotech sector was the topic of much discussion after Federal Reserve chief Janet Yellen described it as “substantially stretched.”
Well, that discussion died down as the bull market kept raging on, as have biotech stocks.
But the fact that biotech has climbed more and more doesn’t mean that a bubble doesn’t exist.
More and more IPOs have received higher and higher valuations- valuations that have pushed more and more ambitious young companies to go public at earlier stages, including before products even hit the market…
That’s a scary scene that continues to grow, and one that is awfully reminiscent of one of the recent stock market bubbles that caused (or at least spurred on) crashes.
But avoiding gigantic losses from a biotech bubble burst doesn’t have to be incredibly complicated. Instead, it could be as easy as paying attention to a particular sign.
The Biotech iShares exchange-traded fund (IBB) is a representative of the state of biotechnology. Right now, it’s trading at a price around $390. In the short term, here are the signs that will alert you to a possible bubble burst.
1. When the IBB price falls below $366, it’s time to be on high alert. If you own biotech positions, this is a good time to downsize or get out. This may not mean a crash is imminent, but it’s a big clue that biotech is ill.
2. When the IBB price falls below $340, lookout. At that point, biotech could be looking over a cliff, and all it will take is a tiny push to send the sector into free-fall.
The biotech bubble bursting and the stock market turning over into a bear market will likely coincide with each other and feed off of one another. So paying close attention to the signals I just mentioned could actually save you from a lot more than just losing money on your biotech holdings- it could save you from a stock market crash.
And remember, there are 3 positions you can have as an investor- buying, selling, and cash.
Cash means you’re not in the market, and that could be just as good as making money when the market is crashing down…
