Testing The Reversals
First, some housekeeping.
This morning’s action in biotech SPBIO, forced exit of LABD-22-12, with a minimal loss of -0.12% (not advice, not a recommendation)
There was a bounce off SPBIO, resistance in the early session and then, it became clear the market was setting up to penetrate that resistance.
As the Fed announcement progressed, SPBIO, indeed moved up sharply.
By definition, such action puts SPBIO, in a test of a prior Up-Thrust (reversal) from 11/11/22 – 11/15/22.
Conversely, it puts the leveraged inverse fund LABD, in a test of a Spring set-up during the same period.
You can already see where this is going.
The work has been done on a fundamental basis as well as technical; biotech is set for significant downside.
Whether or not, we’re at that inflection point right now, is unknown.
Biotech 3X Leveraged Inverse LABD, Daily
Looking at the mark-up below, we’ve had a spring set-up; then, sign of demand with action moving higher and finally today, a test of that spring set-up.
David Weis used to call such drastic moves a ‘gut-check’, to see if you can hang on (not advice, not a recommendation).
Price action has come right back to support with a wide bar and high volume.
Such bars increase the probability of a counter move to test which in this case, is a move higher.
Remember, all this action’s occurring ‘within’, the SPBIO, bear flag that’s formed over two-plus months.
It seems like a huge understatement to say this market and the main indices, are in a dangerous position.
Not advice, not a recommendation.
Like a Terrier on a Mailman’s leg, we’re not giving up on biotech’s potential downside … at least not yet.
Short position in SPBIO via LABD; details are as follows:
Entry @ 18.72***: Stop @ TBD***
Note: Positions may be increased, decreased, entered, or exited at any time.
***, Indicates change
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