Biotech is Bubbling Up
- Posted by Greg Harmon
- on March 15th, 2017
Biotech stocks were some of the leaders out of the lows in the market in 2009. They went on a 6 year tear to the upside after really being flat for many years before the financial crisis. The Biotech ETF ($IBB) gained 500% over that time period. Money was made hand over fist trading these stocks. Every college student wanted to get into the business side. And then in July 2015 the bottom cracked. And Biotech started to pull back.
In hindsight it does not seem so unusual to retrace 50% of a move up before a reversal. Until you put the real numbers on it. From 80 to 400 back to 240. And the move down only took 6 months, not 6 years. But that is all in the past now. Since that pullback the Biotech ETF has moved in a sideways range for nearly 18 months. Or has it? I think I see signs of life bubbling up.
On a closer review of the chart below we can see that the 200 week SMA stopped the fall and has been acting as support ever since. 2016 saw the ETF trade in a range from 240 to 285. It broke that range to the upside in August but disappointed many. It could not follow through to the upside and just established a new slightly higher range from 250 to 300. Last week saw the ETF back at the top of the range and now reaching the 100 week SMA. It is stalling as we head into the Ides of March, but has been building solid upside characteristics.
Momentum indicators are looking bullish. The RSI is making a near 2 year high and poking back into the bullish zone. The MACD is also rising and bullish, over the zero line. Shorter term the Bollinger Bands® are opening to the upside. All this picture needs is for price to follow with a break above resistance and over that 100 week SMA. A longer term target would be established then to 560 on an AB=CD pattern. But lets not get ahead of ourselves. The big price levels to clear first will be 342 and 360 then 400. Things are bubbling up in Biotech. Time to pay attention.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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