11/14/19

 

Biotech in Up-thrust

 

It’s an interesting picture.  A price pattern that’s potentially as old as the market itself (spring to up-thrust); a measured move that is in near perfect symmetry.

 

With the disclaimer that anything can happen in the market, if IBB reverses from here, it’s in a good position (from a technical standpoint) to drop to the low 90s.

 

That’s a potential 18% move lower. 

 

Note: 

The magenta dashed line measured move, is an exact cut-and-paste copy of the existing, spring to up-thrust trading range.

 

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10/31/19

 

Biotech Stretched

 

The biotech sector (IBB) continues to set-up in a potential reversal.  The chart of IBB shows two prior reversals that were both preceded by a spring.

 

The current up-thrust appears to be taking its time.

 

The wide and fast 10-point move from 97.50 to 107.50, has opened up the potential for a 20-point move to the downside.

 

That would be 10-points down, testing the range and if there is a break lower, a measured move for another, 10-points.

 

From a percentage standpoint, it’s a potential drop that’s nearly 19%.

 

Nineteen is close to twenty and getting ourselves way out in front, we’ll know the move is possibly over when the financial media talks about the ‘Biotech bear market’ being down 20%.

 

For now, price action dictates trade action. 

We’re in up-thrust condition at the danger point; where risk is least.

 

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10/29/19

 

Biotech Up-thrust

 

Biotech (IBB) continues to be in up-thrust condition.  The daily close chart has price action penetrating known resistance and closing above that resistance.

 

Can it hold? 

 

Take a look at the last time this happened earlier in the year.  The answer then, was no. 

 

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10/26/19

 

Biotech:  The Canary?

 

Is Biotech (IBB) the canary in the coal mine?

 

The weekly chart gallery from Friday’s (10/25) pre-market update shows a potential series of price action contact points that imply we’re at a pivot.

 

The close for IBB on Friday ended lower from the prior session; possibly hinting, the down-move has started.

 

On a weekly close basis, we see a spring to up-thrust condition; yet another clue.

 

Unlike the real estate index (IYR as proxy) there is really no dividend providing support for IBB.  Current yield stands at 0.14%.  Source:  www.bigcharts.com

 

So, this is it.  Monday’s action will add to the confirmation of a pivot lower or begin to chip away at the potential.

 

Two inverse funds for Biotech are BIS and LABD.  However, LABD has significant bias errors and is really just a day-trade vehicle. 

 

Obviously, this is not a recommendation.

 

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10/24/19

 

Biotech (IBB) Hits Trend Line

 

10:15, a.m EST

 

It looks like IBB is at well established resistance.

 

Note how the spring set-up was used for price action to launch into resistance.

 

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7/15/19:  IBB, Pre-Market at 8:27 a.m. EST

 

Oscillating around support and resistance is normal market behavior. 

 

For Biotech IBB, we’re at the juncture between spring and gap-fill higher and/or contact and verification of an aggressive -91%, annualized trend-line.

 

If we look at the highly liquid and leveraged inverse fund LABD, pre-market activity shows it trading slightly lower indicating IBB will open slightly higher.

 

If so, IBB may open right into the nascent trend-line as shown by the gap-fill arrow on the chart. 


7/12/19

Biotech (IBB) Gap-Lower Open

 

It’s nearly one hour after the open and Biotech (IBB) may have posted a breakaway gap lower, a spring higher, or both.

 

Once a prior low has been penetrated, it’s natural market behavior to attempt a ‘spring’ off that low.  Whether or not the spring action will hold is the question.

 

In a decided down trend, the spring action fails and the market continues lower. 

 

IBB appears to be at that juncture now just sixty-minutes after the open.  We see a breakaway lower that may or may not hold depending on the spring attempt.

 

The important part is to understand where one is in the move.  Right now, we’ve had a gap-lower open and are in spring position.

 

The overall trend still remains down and probabilities favor continuation of that trend.

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7/9/19

Biotech (IBB) At The Danger Point

 

Evidence of a struggle is what we see in Biotech (IBB) as it twice attempted to breakout higher.

 

Price action has come to underside resistance as a test.  The important element at this juncture is volume.

 

Today’s volume contracted to 1.3-million, down 71.74%, from the previous session 

 

The prior two sessions were each down on heavy volume:  Friday’s action was down on 3.4-million and yesterday’s action was down on 4.6-million.

 

The expectation for the next session is a lower open followed by a continuation of the downside. 

 

However, if there’s additional pressure to the upside or price action hesitates, probabilities decrease significantly for a swift move lower.

 

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6/30/19  Biotech

 

Biotech (IBB) continued lower for two days and then reversed to post a higher daily high.  The trend appears to have changed and the short position (via BIS) was exited early after the open on Friday, the 28th.

 

The loss on the trade was a minuscule three-tenths (0.34) point for the entire position … having made five entries as the index moved lower.

 

The weekly chart shows a potential spring albeit with a deep penetration below support and a reversal higher.  Resistance areas are noted.  

 

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6/25/19:  Biotech Pivot Point

 

As the S&P makes new highs, one market in particular is not participating.

 

Biotech (IBB) made its all time high years ago in July of 2015.  About that time, David Stockman issued a report essentially calling it:  'Two Trillion Dollars of Bottled Air'.

 

I’ve traded this sector often but in the past few weeks, its become especially interesting as IBB posted the sought after “spring to up-thrust” set up.

 

There's no guarantee of a swift and sustained reversal from this point.  However, this is where probabilities coalesce into a low risk opportunity.

 

We’re at the danger point; price action can go either way.

 

High to moderate liquidity inverse funds for this sector are BIS (2X inverse) and LABD (3X inverse).

 

It’s important to note that LABD has significant downside bias and I do not trade this fund except on a very short (a few days) time-frame.

 

The BIS has less leverage and is less liquid but has a much improved (inverse) tracking of the IBB.


3/11/19:

Biotech Short Trade Closed With 20% Gain

 

The biotech sector was shorted over the last week and the trade closed out on Friday 3/8/19.

 

We shorted by going long the leveraged inverse fund LABD at the location shown.  There was a slight draw-down of less than 1% before LABD moved higher.

 

It was a modest trade with a gain of nearly 20%.  However, the more important part was the gain relative to the amount risked.

 

Although the actual low occurred after the entry, it can still be used for illustrative purposes.

 

Let's say you’re managing a modest (corporate) account of around $5-Million and decide to risk a tiny portion of this account on the trade.  We'll put it at $10,000.  This means that you would have purchased about 62,500 shares of LABD.

 

With an R-Gain of 22.47, your $10K (risk) now becomes nearly a quarter million dollar gain at $224,700 within about four days time.

 

The objective in the markets is to minimize the risk and minimize the time spent as well.

 

In the case of the LABD trade above, both objectives were accomplished.

 

Obviously, the corporate trade scenario is an idealized presentation. 

 

However, the fact that LABD was entered where volatility (and risk) was minimal and exited near the top of the move is proof in itself that Wyckoff technique still applies today in a financial world choked with obfuscation and the beast of 'artificial intelligence'. 

 

Lions and tigers and Watson ... oh my!


2/27/19 (before the open): 

IBB Up-Thrust

 

Unlike the rest of the major indices, Biotech (IBB as the proxy) made its high years ago in July of 2015.

 

Now, at this juncture, IBB is posting an up‑thrust that has potential to become a full blown reversal.

As with the other markets, we’re at the danger point. 

 

This is the area and time where risk is least.  A failure (with a short position) would likely result in minimal loss while a reversal with new lows, may yield significant gains on the short side.

 

Back in 2015, David Stockman analyzed the Biotech sector;  concluding that it was nearly ‘two trillion dollars of bottled air’. 

 

If we're posting an up-thrust and reversal, IBB may have just run into the pin that pricks the bubble.


3/4/18:  Biotech put in February nets over 1,000% gain

 

The IBB Put option trade is a good example of why downside action is preferred. 

 

While option calls may net a few hundred percent gain as in the GLD trade… puts are a different story altogether.

 

Using our near-expiration method, it’s one day to expiration for the 2/9, IBB 104.00 Put.  All hope is lost with a contract price near zero at:  0.20.

 

Understanding where one is in a price move is critical.  On February 8th, the down move in IBB does not appear to be finished.  Price action over the prior two sessions rebounded modestly and appears to be in a stall.

 

Action moved sharply lower during the 8th and the early part of the 9th.  Real time tape reading was used to determine that we’re at an extreme and the trade was exited (with over 1,000% profit) mid-session as shown.

 

No more than a few minutes later, IBB began an upward move that ultimately culminated in a 105.67, close for the session.

 

Had the IBB put been held into the close, it would have expired worthless.