Lying In Wait

That’s exactly what’s happening with biotech (IBB) and more specifically Amgen (AMGN).

Just like with Newmont and GDX from the previous update, Amgen’s the heavy hitter for the biotech sector.

What we see on the daily chart below and expandable version here, is that AMGN’s at the danger point.

Price action penetrated well established support and then stopped dead (so far).

If that’s the case, we’re looking for price action to rebound and move toward the 242 – 244 area; a 50% retrace from current levels.

If that point is reached, depending on the behavior of price action itself, the expectation is for a long-term reversal.

There have been several trades using BIS and LABD with the overall result being about break-even to slightly down.

More important than outright profit is the trading insight (over several months) into the sector itself.  That insight can only come from active positions. 

No amount of ‘paper trading’ or external analysis will provide a visceral feel for the market.

Summary: 

We’re waiting for price action in AMGN and the overall IBB, to counter-trend upward as we head into November.

If there’s an obvious reversal at that time (not advice, not a recommendation) the risk on a short position may be at its lowest.

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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.

Biotech: Election Top Closer

The October 4th, update proposed a top and reversal for Biotech (IBB) at or near the election.  November, 2nd , or 3rd, could be new highs followed by an immediate reversal.

Fibonacci week 34, from the 3/16/20 lows, is the week ending on Friday, November 6th.

The daily chart (below) has a trend that’s been confirmed; If it remains intact for the next three weeks, it will lead us straight to new highs at the beginning of November.

Following price action in this way allows for preparation. 

Timing, position size and stop levels can be (and must be) planned in advance. Not a recommendation, not financial advice.

The topping formation in biotech has been followed and traded (via BIS and LABD) by this firm since early June. 

Doing so, forces one to be accustomed to the behavior of the sector. 

Behaviors such as counter trend action in IBB, tends to be complete and resume original trend, right around the 10:00 a.m. to 10:30 a.m. time-frame.

That’s a data nugget that can’t be obtained by parachuting into a sector, taking a position and hoping it all works out.

A perfect (short) trade set-up would be for price to gap-higher into the 2nd, or 3rd (November) and allow for an entry with a well defined stop … such as the top of the gap-bar.

Of course, at the open this Monday, IBB could break the trend-line and create an alternate scenario … anything can happen.

However, at this point, probabilities and momentum (although waning) favor continuation upward.

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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.

Friday: After the close

Two markets being watched at this time are biotech (IBB) and natural gas (UNG).

Today’s session in nat-gas was strong but on the downside, price action closed below last week’s high.

There’s a lot going on with the hurricane in the gulf; potential earthquakes (threatening to rupture lines), already happening in the New Madrid zone.

So nat-gas could literally explode at any time. 

We’ve analyzed price action enough to show a reversal underway.

The downside; it’s a bit weaker than expected. At least at these initial stages.  However, commodity markets tend to start slow and then build into a blow-off top. 

So, we could still see intense action during November and December.

Next, is biotech and specifically IBB.

The chart below is an interesting picture.  Price up and volume down.  This type of scenario has one of two meanings:

No. 1:  There is no commitment to the upside and reversal is imminent

No. 2:  Volume has decreased as sellers are backing away from the market … prices may drift higher.

With the negative report from Amgen (AMGN) during the week, the bloom may be off.  Amgen is the leader (market cap) of the sector.  If it has reversed as has been proposed several times, it may be strategic and long term.

The chart wedge that had been discussed here and here has now been officially and decisively penetrated to the downside.

Barring some miraculous recovery, the measured move for AMGN is in the vicinity of 192; about 20% down from current levels.

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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.

How to use Fibonacci projection

There’s a lot happening in the biotech sector. 

Today, Wednesday, 10/7/20, will be a Fibonacci 144 days from the low of March 16th, this year.

If the all-time high (IBB) was reached on July 20th, Fibonacci day 89 (minus 1), then today may be a critical juncture for the sector.

The current move off the low on September 4th, could be a counter-trend move.

Using the Fibonacci projection tool … a standard addition to most chart packages, we see a possible 1:1, a-b-c projection to the 141.28-area.

Counter trend moves (a-b-c), typically have equal ‘a’ and ‘c’ waves.  The ‘b’’ wave in this case was 76.4%, of the ‘a’ wave … deeper (weaker) than normal.

It just so happens the 141.28- area of IBB also corresponds to a Fibonacci retrace of 76.4% from the 9/4/20, low. 

If IBB reaches those levels today and stalls, it’s an indication that at minimum, the market respects this area.

What happens next? 

To go short (not advice, not a recommendation) is selling into a rising market. 

Technical indicators, MACD, moving averages are all pointing up both on daily and weekly .. although weekly MACD lines are still in a bearish cross-over.

Certainly it’s the danger point. That’s what we’re looking for. 

It’s the trader’s discretion on what to do if/when IBB reaches 141.28. From this firm’s perspective, price action behavior itself at the projected level will be the arbiter.

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.

Biotech breakout … Will it hold?

As with natural gas, UNG discussed here, IBB is also at a danger point.

Price action penetrated resistance and closed above that resistance; giving the appearance of strength.

The chart shows Fibonacci time correlations.  Biotech, IBB appears to have form and time structure.

To use Wyckoff parlance, IBB is in an up-thrust; a potential reversal condition.

It’s true that a weekly time correlation appears to be in effect as well; At least at this juncture.  However, it’s price action itself that’s the final arbiter.

If there’s a retrace below support, then a test (form the underside), we’ve got a good indication of reversal

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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.

Biotech: Top at election?

Biotech (IBB) is trending higher and may reach a top right during the election.

If that happens and then reverses, it may be posting a bearish MACD divergence on the weekly chart.

From the low during the week of March 20th, we see a potential Fibonacci time correlation in effect.  A pull back low occurred during the week of June 12th, a Fibonacci 13.

Interestingly, the week of November 6th, is Fibonacci Week 34.

On the sidelines for now; watching for a trade set-up.

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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.

Amgen Higher To 290

Price action itself has negated the breakdown scenario in Amgen (AMGN).

Instead, we now have a wedge that’s forecasting a move higher. 

Using a measure move off a wedge breakout (yet to occur), we can project AMGN to the 290 area.

The expectation is the overall biotech index (IBB) will move higher as well.  If so, there’s a potential to form a bearish weekly MACD divergence if IBB makes new highs.

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.

Peabody (BTU) Trending Higher

Those late to the game on BTU may have cashed out with losses on Friday, September 25th.

So-called ‘expert’ (buy) opinion came out on the 17th and since then BTU has declined anywhere from -8%, to -27%.

We exited our BTU long on the 18th, with a 15.5%, gain.

Now, we see BTU contacting a nascent trend-line.  There could be a trading channel formed as well.

If BTU maintains the trend, it’s rising approximately +3,000%, annualized.

At that rate, a 100% gain on a long position (not advice, not a recommendation) would take about six-weeks.

In other markets, biotech (IBB) pre-market action shows a higher open.  If that’s the case, we’ll exit (not advice, not a recommendation) the BIS position and stand aside.

Update: 9:54 a.m. EST: IBB is reversing immediately from its open. BIS position maintained (not advice, not a recommendation) at this point.

Update: 2:39 p.m. EST: BIS exit @ 31.591

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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.

Biotech Short: Technical Discussion

Short out, short in. That was the trade action for Friday, the 25th.

The pre-market update hinted price action would rise; taking out stop orders at the area shown.  IBB did just that and more.

Early in the session, within about thirty minutes it was obvious that we’re moving higher. The BIS position was exited at 33.10.

Profit on the short, held for ten days was about 6.5%.

Price action continued to rise throughout the day. Late in the session, the short was re-established via another position in BIS.

Not expected, was that IBB continued to move higher into the close of the day. 

BIS moved correspondingly lower.

The position is showing a slight loss of -1.5%.  This amount is well within risk parameters but does require that IBB opens lower and moves lower at the next session.

The chart, with an expandable version here, shows we’re at the top edge of an established trading channel. 

Force Index, upward thrust energy has declined while at the same time price action finished the day right at the axis line shown.

There’s also a Fibonacci time sequence as noted.

The expectation is for a lower open and lower action during Monday’s session.

If price action opens higher, the short-covering scenario as identified in this update, is not in effect; the short position will be closed.

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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.

Amgen At The Edge

The market itself has decided the lower wedge-line is important.

Price action penetrated, then recovered, penetrated again and is now testing the underside.

This oscillation about the line validates its existence and confirms its importance.

AMGN is at the danger point.  Price action can go either way.

Higher, and the wedge has been negated.  Lower and we may have a strategic, long-term reversal.

Separately, the short position via BIS at the trader’s discretion was exited early during Friday’s session.

When it’s obvious, we did not wait around for the stop.

The total profit on the short, held for just ten days, was about four-weeks pay for the typical American worker.

Why list it in those terms? 

With at least 30% of the population out of work and no job in sight, would it not make sense to show how proper research, experience and training may replace some of the lost income?

Getting back to the biotech short position; Later in the session, as IBB was rising, BIS declining, the short was re-established.

More on that entry is planned for tomorrow’s discussion.

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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.