Biotech … ‘Brace for Impact’

Downside Leader

From the outset of the bull market’s end, biotech has been the downside leader.

Of the two indices being tracked, IBB and SPBIO, the latter of the two, is the weakest.

Over the past several weeks, it’s been like a terrier on a mailman’s leg concerning positioning short this index (not advice, not a recommendation).

In the end (as we’ll see below), it turns out that waiting for an actual penetration, print, and close above resistance, was the best approach.

Now, it’s obvious, we’re in a reversal.

The unfortunate part from an economic standpoint, this could be the next big leg lower.

Biotech SPBIO, Daily Close

Penetration and close above resistance (blue line).

Then, price action retreats below resistance and back into the trading range; Wyckoff, Up-Thrust (reversal).

It’s important to note, if SPBIO closes at this level or lower, the prior analysis of ‘grinding to a halt‘ on a weekly close basis, remains valid.

Positioning

Right or wrong, the short position LABD-22-03, was never fully exited (not advice, not a recommendation).

Everyone has their own style.

From a personal standpoint, I despise ‘chasing’ the market. Chasing is for the lazy or frightened who are too afraid to pull the trigger. No thank you.

In fact, the LABD-22-03, position was increased near the end of yesterday’s session.

The intuition, the gut feel, if you will, was ‘This sector’s going to reverse. When it does, it’s going to reverse hard’.

With today’s pre-market action (about fifteen minutes before the open), LABD, trading higher by 3.10-points, or +6.35%, that intuitive assessment is proving correct.

At this point, an obvious stop level would be yesterday’s LABD, low @ 45.77

Stay Tuned

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.

The Danger Point®, trade mark: No. 6,505,279

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