On a closing basis, biotech’s hit three areas of resistance.
We’ll put all the lines up at one time (chart above) and then break it down.
First, there’s the underside of the trend break that’s already been discussed in prior updates.
Second, the resistance formed by the underside of the head and shoulders pattern identified in a prior update as well.
Last, we could have a trading channel in effect. If so, price action contacted and closed at the right side in yesterday’s session.
The following charts get a closer look at two resistance areas:
Using a ‘reverse trendline’ technique outlined by Weis in his DVD, we take contact on the left side and move it to the right.
The chart below shows the H&S resistance area (underside) contact:
Putting all lines together gets us the chart at the top of this post.
Long term MACD indicators are down; both monthly and weekly. Momentum is to the downside.
Probabilities favor a reversal
The potential downside is enormous. The markets are extended the most in history. Margin debt the most in history.
We’ve got kids running around with trading apps designed to make it look like a game. It’s no different from the Shoe Shine Boy at the steps of Wall St., giving out tips.
Positioning:
We’re short biotech via LABD (not advice, not a recommendation).
The highly leveraged inverse ETF, performs best when the direction of IBB is down in a steady and decisive move.
Otherwise as we saw near the close yesterday, IBB could be reversing to the downside while LABD is still eroding lower in value.
Inverse fund BIS does much better in this area but is not nearly as liquid. That makes pre and post market trades impossible.
We’ll be looking for IBB to post a new daily low as confirmation a reversal is underway.
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.
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 ETF, IBB looks ready to complete its breakout test and reverse to much lower levels.
There’s a lot going on in this sector.
At this juncture, IBB appears to be the overall downside leader.
The link to this video is the first of its kind. There’ll be more to follow.
Judging from the comments section of ZeroHedge, looks like everyone’s pretty much awake at this point.
Just in case, here are 25-quesitons that can be posed to those still asleep.
Pay special attention to Question No. 11. & No. 12.
At some point you would think it’s all going to bust wide open.
Moving on to the chart:
IBB’s been in a terminating wedge for over a year. There was a ‘throw-over’ in February. Next, was downside penetration of the lower boundary. Now, we’re in a test.
That test can still go higher to contact the boundary underside. However, as posted yesterday, we’re already positioned short (not advice, not a recommendation) at the 38.2%, contact and rejection.
From a fundamental perspective, all the good news is out. Probably the last of any ‘stimulus’ will be figuratively mailed out by the end of the month.
Bonds look to be forming a bottom and the dollar as well.
Even so, the higher interest rates are already having an effect as home buyers are backing off. Lumber prices remain at insane levels.
Positioning:
Last session, the firm’s accounts went short biotech. Pre-market action in LABD shows a slightly lower open (higher for IBB).
The stops for both BIS and LABD have been provided in the last update. Be aware, the stop is loosely based on the tracking fund IBB.
If IBB posts a high above 154.60, its likely to attempt a 50% retrace.
One caveat:
There’s probably an accumulation of short stops (like ours) at the 154.60, high.
If there are enough, the market will automatically go one, or two ticks higher (154.62), to clear them out.
We’ll watch for that and adjust our stops accordingly. If this happens, it’s likely to be within the first 90-minutes of trade.
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.
In price action very similar to AMT before its reversal, IBB looks ready to move decisively lower. Early session hit 38.2% retrace and now, test action (higher) looks weak.
Markets are fractal. Price action repeats itself at various time-frames.
Expectation is that IBB will continue lower from here just as was the case with AMT.
The difference is, since we’re dealing with an hourly time frame instead of daily, price action is faster.
All accounts have been cleared of positions except for being short biotech.
Positions are as follows (not advice, not a recommendation):
LABD: Entry, 19.976, Stop 19.52
BIS: Entry 22.32, Stop 21.75
There are a number of problems for biotech hovering the background that could blow the lid off the ‘planned event’ of the past year.
More information to be provided in a subsequent update
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.
With the kids at the card-table, freaking about ‘plunge protection team‘, rigged markets and Bitcoin, grownups the next table over, are planning their moves.
Friday’s late session rebound higher was not uncommon for a typical short squeeze.
These gyrations are intended to make sure only a select few are aboard when we get the break.
This idea is not new. You’ll find statements to that effect over and over in most any trading book.
The big difference now, is the amazing level of complacency and learned helplessness of the overall population.
Just one example of such before we move on to the charts.
Texas has opened up. Schools are about to go without diapers. Perish the thought.
Yet, there’s still a contingent that’s near hysteria about ‘safety’.
With all the information available, yes one actually has to do real research to find out what’s going on, huge segments of the population adamantly remain (intentionally) ignorant.
Unfortunately, that segment has voluntarily (at least in the U.S.) lined themselves up to be taken out; financially as well as physically.
Just a few of the most recent links, here, here, and here.
At some point, those links are going to become common knowledge.
Hopefully, there will be long lasting and certain retribution for the perpetrators. However, for those who ‘volunteered’, it’s already too late.
Now, on to the markets.
Friday’s real estate rebound (IYR) looked like short-squeeze action.
In response to that and late in the session, short position DRV (3X inverse IYR) was increased at price 9.37 (not advice, not a recommendation).
Volatility is still low in IYR. Short positions can be increased with less risk.
The Big Break
When and if the break comes, it’s likely to be fast; no time to plan.
Whatever plans one has should’ve been laid out well ahead of time.
Two markets being watching closely are Peabody Energy (BTU) and Seabridge Gold (SA).
By now everyone’s aware that a certain far east country is going about its business and building their infrastructure … as if nothing had ever happened. Funny that.
Conversely, the coal market has bottomed out and so has Peabody.
On top of that, the Texas Freeze laid bare the farce that is climate change, global warming and green energy.
Quietly, without fanfare, coal is seeing increased demand.
The blue arrow is a gap in trading that could be filled.
To do that, there might have to be a massive market collapse, pushing BTU back to that level … if only temporarily.
Huge volume in the past six months shows that somebody’s buying.
The next market is Seabridge Gold (SA) which is being watched for essentially the same reasons. If Van Metre is right and we’re in a deflationary impulse, the entire public’s on the wrong side of the trade.
If SA can get itself below 13 – 14, it then enters free-fall territory.
If that happens, as with BTU, it too might be a short lived event.
Positioning:
Currently, the firm’s position (not advice, not a recommendation) is short biotech and real estate via LABD and DRV, respectively.
If BTU and SA get to extreme lows, both of them have potential for a ‘ten-bagger’, the possibility to gain over 1,000%.
Getting to such gains would necessitate a change in the current strategy of trading, to buy and hold.
Summary:
Pressure seems to be building for some unexpected event that would cause a market break; Possibly the devaluation of the Yuan as discussed by Steven Van Metre.
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.
That was a phrase from the late David Weis, used during his training session video (link here).
That’s what we’re gong to do.
Biotech (IBB) is nearing support and it was thought the overnight would result in an obvious gap-down open, exit signal.
However, with just about a half-hour to go before the regular session, markets maintained their positions overnight keeping the door open for continued decline or counter-trend action.
All markets, the S&P, Dow, Nasdaq, (and biotech) are pivoting lower from insane valuations. We could be at the very beginning stages of a sustained deflationary move.
One example of how such moves behave, was the oil market in July of 2014. The tracking fund USO, had nine successive down months (declining over 60%), before a significant retrace.
With that in mind, we’re setting the LABD stop at the prior session low of 21.80 (not advice, not a recommendation).
With an LABD entry point at 18.08, being stopped out at 21.80, would yield a gain around 21%.
So, we’ll leave it there and move on to other opportunities.
The weekly has IBB, nearing support around 140 – 142 (dashed line). We can expect price action to hesitate as (or if) it encounters those levels.
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.
Markets might continue their decline in overnight and pre-market.
If pre-market or early regular session has IBB trading near its target level, we’ll plan on exiting (LABD) in response; not advice, not a recommendation..
Every other active trader sees the H&S at this point and is probably waiting to close out (their shorts) at or near the bottom.
If so, it may result in buoyancy and the trade will start to degrade; exit is warranted under those conditions.
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.
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.
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.
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.
