A Technical Look at Biotech { IBB }

Posted on Monday September 21, 2015

Over the weekend I posted on stocktwits several bearish charts on Biotech stocks. I was seeing the formation of a Bearish H&S Top on the daily view, along with a bear flag on the intraday 30 minute view.

Surely there are ton of  Bulls out there blaming the sell off on Hillary’s tweet.

Rightly so. However this is what we call a catalyst. This catalyst is what starts the sell off, in the same way China was the catalyst that broke the 8 month trading range we were in thru August.

This doesn’t mean the price action was wrong. When you have a head and shoulders topping formation in an industry that has been up a gazillion or so percent over the past 6 years, there comes a point where things stop going up and at the very least CORRECT. It’s normal, and when you learn to recognize what corrections or bearish price action looks like, you can stop with all the BS. You can stop with hoping your stock will stop going down. Hope is not a strategy, Biotechs look extremely vulnerable here so protect your capital.

If we break and hold below 330.60, the technical target here is going to be 260.41. 

This does not mean by tomorrow, it does not mean by next Tuesday, so I don’t want tweets from bulls telling me I was wrong tomorrow. I don’t know how long it will take. It may take 3 to 6 to 12 months, but the pattern is telling you that the current top may be in and there is risk. Shown below, I show you XLE which had a 62.04 target and took 269 days to complete. Nobody thought oil could trade lower either, but it did, didn’t it?

I will let you look at the two charts, and you decide what to do with your capital.

 

KERX H&S Top Example

Shorter Term,  30 minute view. The neckline is just below at 330.60. We broke a 3+ week bearish flag and now have a mini bear flag/pennant.

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