From the desk of Tom Bruni @BruniCharting
Tuesday’s Mystery Chart is one of my favorite charts right now, so thank you all for your feedback and participation.
Everyone was on the same page here, waiting for a resolution before getting involved. Sometimes nothing is the best answer, that’s why it’s one of the choices.
With that as our backdrop, let’s get into it.
The original image was an inverted daily chart of Biogen Inc. (IBB). Here’s the corrected version showing prices testing support near 220 for the 6th time in nearly four years. Based on how this price action, traditional wisdom would suggest a downside break is likely coming soon, especially if the broader market remains weak.
Click on chart to enlarge view.
With that said, this chart stemmed from the fact that Biotechnology stocks on both a cap-weighted (IBB) and equal-weighted (XBI) basis look awful relative to the S&P 500 and the Healthcare sector. Despite that, they continue to hold up on an absolute basis in the face of frequent tests of support over the last two years.
This post started with me looking at IBB and then going to the individual component level to look for short ideas. The only problem was I couldn’t find any clean setups! Biogen was the best one, and even that I wouldn’t categorize as an A+ trade.
I guess the point of this post is to point out my frustration around being catfished once again by the market…finding an ETF that looks actionable only to research it further and identify few opportunities at the individual stock level. The same situation happened to us a few weeks ago with the Food and Beverage ETF (PBJ). That’s just part of the game.
Despite having “Technology” in its name, the Biotechnology subsector has bucked the trend and continues to struggle on a relative basis. If prices do manage to close decisively below 100, then there’s likely further downside towards 81 over the next year or so.
It’s something we’re watching, but not acting on just yet.
Thanks for reading and please let us know if you have any questions!