Biotech is not behaving as expected; LABD-22-08, has been exited completely with an overall profit of about +8.5%.
We all know that real estate is in the largest bubble in U.S. history … and that’s not hyperbole.
With today’s upward bias in the market and IYR, not responding in kind (remaining weak), a position has been opened in leveraged inverse, DRV @ 74.53 (not advice, not a recommendation).
Price action in IYR, could still pressure somewhat higher into the close; thus, DRV would decline but the anticipation is if so, not by much.
Trade is labeled as DRV-22-05; stop is TBD, to be provided after the close.
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.
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.
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.
As we’ll see below, SPBIO, has oscillated itself into a decision point.
From a positioning standpoint, my firm has taken a bearish stance on biotech via LABD (not advice, not a recommendation).
Yesterday’s update anticipated more SPBIO, downside which did not happen.
Instead, we got a test of the latest SPBIO, high.
This testing action does not negate the short via LABD, but it’s now very close.
Once again, we’ll use an inverted chart of SPBIO to mimic the action of leveraged inverse fund LABD.
Biotech SPBIO, Hourly (Inverted)
The blue lines are subdivisions higher and the magenta, subdivisions lower.
The zoom chart below shows just how close we’re to short-set-up, exit. If SPBIO posts a new daily high, by definition it will push past the LABD, stop and the trade will close (not advice, not a recommendation).
Strictly speaking, in the chart above, the ‘risk’, is the distance between the latest hourly low for SPBIO (Inverted) and the stop location at the black arrow.
That’s approximately 50-pts on the SPBIO, chart which corresponds to about 0.43pts for LABD.
After hours action (5:57 p.m., EST) has LABD, trading lower -0.37pts, or -1.68%, @ 21.68, but still above the prior stop location @ LABD 21.23.
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.
We’re going to use the chart from yesterday’s post to set the stage for getting closer-in.
This past Friday’s early morning ‘spike’ is barely visible; the 30-minute (inverted) chart below, has more detail.
SPBIO, 30-minute (Inverted)
Price action rejected the lower levels (higher on SPBIO) and pulled away throughout the session. That ‘pulling away’ continued on, all the way into the close.
That’s a clue there may be follow-through at the next session.
If the early session opens ‘gap-higher’ (SPBIO, lower), into the resistance area (four magenta arrows, hourly chart), it would be the fourth time pressuring at this area; markets rarely hold a fourth attempt.
Summary
Of course, other markets are being watched like real estate (IYR), Tesla (TSLA), and even Basic Materials (DJUSBM), a potential sleeper for significant downside.
Updates are planned if/when low risk shows up.
Positions: Current Stance (courtesy only, not advice).
The following is the positioning of my firm’s main (largest) account.
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.
An immense flood of data; research reports, lawsuits, expose articles and anecdotal evidence; every day, multiple times a day, something new.
Has the biotech technical (finally) lined up with the fundamental?
Those fundamentals are farther down but first, we’ll discuss the technical.
As a reminder, sometimes charts are inverted during analysis. This ‘trick’ was discovered years ago and is based on techniques used by Dr. Alexander Elder.
Biotech SPBIO, Weekly Close (Inverted)
We’ve taken the weekly closing chart of SPBIO ($SPSIBI, on StockCharts) and inverted it to mimic the action of inverse fund LABD.
The index has no volume; so LABD is used instead.
The magenta arrow shows the pivot point for the index, corresponds will all-time record volume on leveraged inverse LABD.
Next, we’ll get closer-in and look at the ‘pivot’ on the hourly chart (inverted).
SPBIO, Hourly (Inverted).
The magenta arrows show successive positions (Livermore ‘probes’) entered (via LABD) before the main entry @ LABD 22.99, which was 90% of position size up to that point.
The next day (Friday) had a gap-lower open that was quickly reversed. Position size was increased by another 5%, at LABD 22.29 (not advice, not a recommendation).
Effective position equates to LABD 23.17
Price action pulled away steadily from the early morning levels, suggesting a sustainable reversal.
The Fundamentals
Some of this stuff, you just can’t make up.
Listed in somewhat chronological order, here they are (not an exhaustive list).
No. 1
Pfizer hires 600 to help document adverse events. Wasn’t it supposed to be ‘safe and effective’?
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.
It’s best to let the reader sort out what it all means, arriving at one’s own conclusions.
Of course, the obvious problem, the ‘elephant’ is not addressed directly.
However, VAERS is quoted in The Epoch Times article, thus giving it legitimacy.
Leading The Downside
For some time, this site’s highlighted, biotech (SPBIO), as unique to all other indices save GDX, and GDXJ.
That is, it’s down the most since the bear market started.
As of today’s close, it’s down over – 54%, from all-time highs while the S&P is down only – 23.7%.
As documented over several years, the sector’s unique; it’s at risk (more than other indices) to implosion.
With today’s close, it looks like we’re at a critical juncture.
Biotech SPBIO, Weekly
The unmarked weekly chart
Compressed, with added trendlines.
It’s an obvious trading channel of immense size … but so is nearly everything else concerning these markets. We’re operating at unprecedented scale in unprecedented times.
But wait, there’s more.
The trading channel has Fibonacci time correlation(s).
We’ll expand the weekly chart for more clarity.
From channel entry, week ending 9/3/21, to the right-most contact point (week ending 9/16/22), is Fibonacci 55-Weeks.
Channel width measured from week ending 1/28/22, to the same contact-point, week ending 9/16/22, is a Fibonacci 34-Weeks.
We’re at The Danger Point®
Positions & Current Stance (courtesy only, not advice).
The following is the positioning of my firm’s main (largest) account.
DRV-22-04:
Entry @ 66.463, Stop @ 63.98
Discretionary exit (today) @ 75.96***
Trade Closed
LABD-22-08:
Entry @ 25.1278, 24.735, 26.025***, 22.99***, Stop is Open (to be set at next session)
***, Indicates change
Note: Positions may be increased, decreased, entered, or exited at any time.
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.
Well-calculated stops, (mostly) take care of trade implosion. So, where’s the exit?
The answer is there’s no set answer.
We’ll explain that by using the current plan for DRV-22-04 (not advice, not a recommendation).
Questions
First question to determine an exit in this case, is to ask:
“What are the media pundits, and/or ‘experts’ talking about right now?”
Well, that’s easy.
Just like the ‘silver squeeze’ idea that won’t go away (even as SLV continues downward), the ‘Fed pivot‘ is another delusion that keeps holding on.
As parts of the market (like IYR) continue their free-fall, all eyes are on the next Fed meeting; waiting for them to pivot and ‘save us’.
Right around November 1st, or 2nd, seems like it can’t help but be some kind of emotional cathartic set-up.
Unless stopped out ahead of time, the plan, is to plan an exit within that window.
Let’s go to the IYR, 3X Leveraged Inverse fund DRV.
IYR, 3X Inverse, DRV, Daily
At the end of today’s session DRV has posted a downside reversal candle.
The next session will be important.
We either have follow-through to the downside, thus validating the reversal (and exit of the position) or we have some variation of an inside day or new daily high.
If the trading channel remains valid, the compressed chart below shows a potential exit range: DRV 140 – 200.
During the next session(s), if DRV, posts a new daily high (unless stopped), the DRV-22-04, stop will be moved to this session’s low @ 73.86
Positions & Current Stance (courtesy only, not advice).
The following is the positioning of my firm’s main (largest) account.
DRV-22-04:
Entry @ 66.463, Stop @ 63.98
ZSL-22-01:
Entry @ 28.08, Stop @ 28.53:
Discretionary exit (today) @ 31.5513***
Trade Closed
LABD-22-08***:
Entry @ 25.1278 (yesterday) and 24.735 (today), Stop @ 22.59
***, Indicates change
Note: Positions may be increased, decreased, entered, or exited at any time.
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® 