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.
Wyckoff (tape reading) analysis identified the potential reversal in XBI.
In the past two days of trading, biotech XBI, is decisively lower (not advice, not a recommendation).
However, there’s more to this story.
As we’ll see below, Fibonacci is at work as well.
Biotech XBI, Daily Close
From closing high on 2/27/24, to closing high on 9/19/24, was a Fibonacci 144 days (minus one).
Ladies and Gentlemen, it doesn’t get much better 🙂
The black lines show resistance penetration, up-thrust and reversal.
Livermore, Wyckoff & Loeb
The trading methods of the three market masters above, can be summarized as:
Strategy, Tactics and Focus.
Livermore’s method of ‘what’s going to happen in a (potential) big way’, pointed to biotech.
Wyckoff’s analysis was used to identify (to the day), the potential for a significant reversal.
Loeb, who is less known, was the former Vice Chairman of E.F. Hutton, disparaged ‘diversification’ as the ‘averaging of errors’; meaning, if you don’t know what you’re doing (in the markets), you ‘diversify.’
We can see all three at work in the selection to go short biotech via LABD (not advice, not a recommendation).
Fixing Errors
For those watching, you got to see up close and personal a trading error on shorting the SOXX; specifically, an -11.6%, hit, link here.
As of this post, four trading days later, that loss has been fully recovered and then some.
This is how should be done.
Clear the mind, look for (don’t force) another opportunity, get to back to business.
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 market gives us clues, we just need to know where to look.
Even before last Wednesday’s Fed announcement, bonds were already heading lower (rates higher), reversing the day before.
Tuesday through Friday had successive lower closes in long bonds, TLT.
All of that, to wind up the week ‘outside down’, or posting a ‘key reversal’.
Those don’t happen often.
Long Bonds TLT, Weekly
The last outside-down weekly bar (in an uptrend) was over two years ago.
Bond prices declined 32%, before recovering.
In what seems to be a recurring theme, Force Index (like XBI, NVDA) is telling us there’s little-to-no-energy left to move prices higher (rates lower).
Of course, anything can happen, and reversals can themselves be reversed.
However, if bonds continue lower, it’s probably time to get the popcorn ready to see how the media paints the picture.
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.
It was just four days ago, the mainstream (in this report) was telling us, be on the lookout for a biotech breakout.
That was then … here we are now.
Price action in XBI, attempted to break higher at the Fed announcement.
That move appeared to fail by the end of Wednesday’s session … then came Thursday’s launch higher.
However, that move may have failed as well.
Biotech XBI, Hourly
At this point, we’ve posted a Wyckoff Up-Trust (reversal).
If this is a significant reversal, we’re still in the very early stages; at The Danger Point®
Positioning
As can be seen in the sidebar, a short position was opened (yesterday), LABD-24-18.
That position has been increased in size during this session (not advice, not a recommendation).
The SOXX (short) Exit.
Yesterday, SOXS-24-16, was exited with an -11.6%, hit; so, everyone can see the effects of breaking one’s discipline (not respecting the position stop).
Don’t force the trade … sounds so simple.
Getting back to work, the XBI false breakout was recognized early and the trade opened.
Today, so far, we have follow-through, confirming the reversal.
Bonds Continue Lower
Bonds, TLT, are currently posting an outside-down (reversal) on the weekly timeframe.
The last time there was an outside-down on the weekly, was over two-years ago; week of August 5th, 2022.
After that, bonds declined a whopping 32% before (slightly) recovering.
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.
Well, obviously the last bullet item is ‘not advice, not a recommendation’.
However, one can’t deny that all of the above bullet items (save the last) concerning price action have been met.
Fibonacci Retrace & Projection
Moving on to the chart, we have the XBI daily, with two Fibonacci overlays.
The first, is the typical retrace from high to lows; the second is a projection from the ‘a-b-c’ correction (a-b-c, labels not shown).
Biotech XBI, Daily with Fibonacci
Admittedly, it’s a busy chart.
The attempt here, is to show a ‘confluence of events’.
We’re meeting Fibonacci time sequence and two Fibonacci price action levels, simultaneously.
Obviously, that does not guarantee anything.
What is does do, is show we’re at a point where probabilities have lined up for a reversal (not advice, not a recommendation).
Positioning
As can be inferred from the sidebar a short has been opened: LABD-24-17, with stop level tentatively set at the LABD daily low for the session (not advice, not recommendation).
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.
Monday’s losses were (mostly) recovered by the close on Friday.
One might be inclined to think we can all get back to ‘normal’.
Normal, like rigged elections, poking the bear (expecting nothing bad to happen), attempted assassinations, fake data, falsifying employment records, more ‘visitors’ flooding in, you know, normal.
However, for anyone paying attention, the charts say we’re at The Danger Point® (not advice, not a recommendation).
The potential for biotech XBI, has been covered over the past few days (here and here), but we also have another potential set-up; the finance sector, XLF.
We’ll cut to the chase, with the chart.
Finacial Sector, XLF, Daily
It’s important to note: It was four days of retrace (upward) into the test; each day had less volume than the day prior.
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.
If there was a day to attempt a close of the (August 2nd) gap in biotech (XBI), today was that day.
With the higher open, supposedly from an interest rate policy reversal in Japan, link here and here, there appeared to be plenty of upside momentum for higher prices.
It didn’t happen
Instead, XBI posted a new daily low, painting that gap as a downside breakaway (not advice, not a recommendation).
As noted in other updates, failed moves are the most telling, getting focused attention from ‘The Street’.
Biotech XBI, Daily
The breakaway is noted.
In addition, trendlines have been updated.
The market could somehow recover and close the gap.
However, with the poor bond auction, pointing to no rate cut or even a rate increase, probabilities suggest more downside for XBI (not advice, not a recommendation).
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® 