Eye Of The Needle … Biotech

Threading It Close


One more subdivision.

After the last post, was released, looking at the after-hours action, there was one more possibility for SPBIO, to subdivide (higher) and still be in an overall downtrend.

It was the skinniest of margins, the eye of the needle but that’s what we got with yesterday’s price action.

While the rest of the market remains hypnotically fixated on bull or bear and who’s right, one is reminded of the old Ned Davis, trading adage; ‘Do you want to be right, or do you want to make money?’

The tape is always right.

Yesterday, biotech SPBIO, made one last subdivision to the only level it could go while still remaining in a downtrend.

Follow The Rules … Break The Rules

That title is borrowed from the interview with Ed Seykota in the book Market Wizards.

Late Monday night, looking at the after-hours, it was obvious price action might blow through the LABD stop at the next session.

With that in mind, a forecast of price action was drawn on the hourly chart of LABD.

That forecast (drawn on the broker’s platform) showed the conditions under which the rules would be broken, the position held, and the stop temporarily ignored.

Replicated on the Worden Brothers, platform (below), is a representation of that forecast.

SPBIO, Leveraged Inverse LABD, Hourly

Wednesday (today) Early Session

Judge for yourself. We’re interested in the form of the action and not necessarily the time required.

It was thought the reversal would be complete in a day; looks like it’s a day and an extra 30-minutes. 🙂

The Challenge

To those seriously addressing (working) the markets; Challenge yourself to draw the ‘excepted action’ of the market before and after taking a position.

If your forecast does not match, then obviously something else is happening. Is that ‘something’ in line with acceptable price action for your position … only you can decide.

Summary

The short position in biotech (LABD-22-08) has been maintained (not advice, not a recommendation). Now that it looks like a reversal, this sector could be in serious trouble.

All the while, the fundamentals continue to build.

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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