Biotech Breakdown

Biotech ETF, IBB looks ready to complete its breakout test and reverse to much lower levels.

There’s a lot going on in this sector.

At this juncture, IBB appears to be the overall downside leader.

The link to this video is the first of its kind. There’ll be more to follow.

Judging from the comments section of ZeroHedge, looks like everyone’s pretty much awake at this point.

Just in case, here are 25-quesitons that can be posed to those still asleep.

Pay special attention to Question No. 11. & No. 12.

At some point you would think it’s all going to bust wide open.

Moving on to the chart:

IBB’s been in a terminating wedge for over a year. There was a ‘throw-over’ in February. Next, was downside penetration of the lower boundary. Now, we’re in a test.

That test can still go higher to contact the boundary underside. However, as posted yesterday, we’re already positioned short (not advice, not a recommendation) at the 38.2%, contact and rejection.

From a fundamental perspective, all the good news is out. Probably the last of any ‘stimulus’ will be figuratively mailed out by the end of the month.

Bonds look to be forming a bottom and the dollar as well.

Even so, the higher interest rates are already having an effect as home buyers are backing off. Lumber prices remain at insane levels.

Positioning:

Last session, the firm’s accounts went short biotech. Pre-market action in LABD shows a slightly lower open (higher for IBB).

The stops for both BIS and LABD have been provided in the last update. Be aware, the stop is loosely based on the tracking fund IBB.

If IBB posts a high above 154.60, its likely to attempt a 50% retrace.

One caveat:

There’s probably an accumulation of short stops (like ours) at the 154.60, high.

If there are enough, the market will automatically go one, or two ticks higher (154.62), to clear them out.

We’ll watch for that and adjust our stops accordingly. If this happens, it’s likely to be within the first 90-minutes of trade.

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

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