Why the biotech rally could continue

Why the biotech rally could continue

Trading Nation: How hot can biotech get?

David Seaburg, Cowen & Co., and Ari Wald, Oppenheimer, join “Power Lunch” to discuss the biotech rally.

Biotech stocks have been on fire. The industry has risen 40 percent in the past year, and added 2.3 percent on Friday alone. This after drug giant Biogen reported positive results for a new Alzheimer’s drug, leading its shares to jump 10 percent.

And some traders say that the rally still has legs.

“It really can keep rallying like this, because it’s all predicated on the real tail wind of fundamentals here,” said David Seaburg, head of equity sales trading at Cowen and Co.

“Until you show us a better sector that shows more promising growth, money’s going to continue to flow into biotech,” he said Friday on CNBC’s “Trading Nation.”

Read MoreBiogen Alzheimer’s drug exceeds expectations

Indeed, even after Friday’s announcement and subsequent rally, the stock’s forward price-earnings ratio is just 27, Seaburg points out.

Even the technicals continue to look promising, according to Ari Wald, head of technical analysis at Oppenheimer.

“The charts are very overextended. But that’s not necessarily a reason to sell,” Wald said.

“But if you haven’t bought biotech, probably today’s not the best day to do it,” he added.

Wald recommends waiting for the Biotech ETF (IBB) to fall back near $350, a bit less than 5 percent from Friday’s close.

Still, noting that the overall trend looks strong, Wald says that “longer term, this is the place to be.”

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Why the biotech rally could continue

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