I like to take things at face value. It’s makes life so much easier that way! But every once in a while, and probably more so in this business, some things just make you go “hmmmmmmmmm…”.

Two weeks ago, Goldman Sachs issued a very public call on the biotech sector. If it was almost anyone else, you would shrug your shoulders and move on. However, with Goldman, I sometimes take the “curious” stance, rightly or wrongly so.

Goldman downgraded biotech as it digested a series of all-time highs. While it wouldn’t have been the place I would have downgraded a group, it’s certainly their prerogative. Curiously, that day saw biotechs’ lowest close of 2014 and a breakdown from the pattern which presumably caused some stops to be hit and more selling. But the very next day, the sector began a 9 day, 10% nearly vertical rally.

So the question that begs to be asked is, did Goldman downgrade to force stock from weak hands to strong hands before the big rally? OR, did Goldman just make an embarrassing bad call in the short-term?


I think the chart above tells the whole story, but I will let you decide… (click on the chart to enlarge)

Editor’s Note: Be sure to check out Paul’s Blog: Invest For Tomorrow

Paul Schatz

Paul Schatz is President and Chief Investment Officer of Heritage Capital, LLC, in Woodbridge, CT. Paul developed and manages all eight of the firm’s currently offered investment programs.

Paul brings an increasingly high tech approach to investing by enhancing all of the firm’s investment models and data monitoring using sophisticated computer programs. Heritage Capital is a Registered Investment Adviser.