Fear and Greed

12:31 p.m. EST

Of the two emotions, fear is easier to trade.

Trading professionals prefer down markets.

Even in his trading video, the late David Weis remarks … ‘I have a preference for down markets …’

Profits come nearly twice as fast and the bottom is easier to detect.

With that in mind, the daily chart of inverse biotech fund LABD, has been noted showing both emotions:

Extreme fear shows up as spikes at the trend line. Also noticeable, the spikes are widely spaced.

Greed on the other hand, is spaced closer and harder to detect. Remember, we’re looking at the inverse (LABD); fear and greed locations are swapped.

Moving on to the set-up, the Wyckoff spring:

Considering the current situation … i.e. valuations, margin debt, retail participation extremes, the above forecast is a modest one.

A potential doubling in value (measured move).

The expectation is for LABD to contact the upper trading range somewhere around 27.50 (not advice, not a recommendation).

If it does and then breaks to the upside, a standard measured move (trading range distance, magenta lines) would target the 40-area.

At this juncture, the market (SPBIO) is giving no overt indication of imminent collapse.

This is how markets work.

If we do get the expected wipeout, be prepared for the usual suspects to come out and say ‘No one saw it coming.’

Stay Tuned

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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