The FBI? Nah, It’s All About The XBI

Clearly the news cycle in the United States has become a constant chorus of chaos and calamity, but never fear my stock market loving friend, JP is here to provide you with some tranquility and calm thoughtful analysis, and more importantly, tell you what you should really be focusing on this weekend: The XBI!

First lets do a little refresher to establish some background on the ideas I am about to explain regarding the XBI.

Biotech Sector ETFs

Looking at the higher time frame charts the IBB, which contains larger cap companies like AMGN, GILD, BIIB, and CELG, it hasn’t yet surpassed the highs from July 2015.

The XBI however, has been above the July 2015 highs since January. Check out the chart.

XBIvsIBB

Taking a look at the lower time frame chart of IBB, you can see it surpassed the highs of January in late July.

IBB

However the XBI surpassed the January highs in early June, before the IBB, and has been consolidating ever since.

XBI

To me this shows that the “riskier” index, the XBI, has been stronger and lead the overall biotech sector higher over time.

Therefore if the biotech sector is going to move higher from here, the XBI should be the first to make that move.

My attention is on the XBI to watch for resolution of this consolidation pattern. Furthermore, I am looking at this as a bullish consolidation moving into a potential support area, which would suggest a move higher is the most likely outcome.

However there is always the possibility that price will not move in the manner of my forecast, which is where risk management must be applied.

Using the methods and techniques of #marketsorcery , we would conclude that the 92 level must remain as solid support or the analysis will likely be negated, or at the very least postponed. Therefore if 92 were to be broken to the downside in a manner determined to negate the analysis, the trade must be closed and the loss taken promptly.

Individual Biotech Stocks

Along with what I have noticed and detailed above in the overall Biotech ETFs, there has been a noticeable amount of the smaller Biotech tickers populating my scans for the past few weeks at least.

Lets take a look at a few charts and discuss some important information along the way.

First up is BIOS, have a look.

BIOS

Notice the similarity in this pattern to the consolidation pattern happening in the XBI?

Let’s look at another one, BDSI

BDSI

BDSI is a slightly different looking chart, but shows a similar consolidation pattern taking shape.

Next up is RCUS 

RCUS

Again this one is a bit different, and it is an IPO, however one can still make out the clear consolidation pattern forming here.

Next up is one of my favorite IPO charts DCPH, due to the consolidation pattern it is forming.

DCPH

Lastly take a look at APVO.

apvo

Notice the similarity in how all of these consolidation patterns are setting up?

What does all of this mean?

Lets wrap it all up and put a bow on it.

When individual names within a sector start to form similar patterns, and the overall index for that sector is also showing the same pattern, this often signals a move for the overall sector is not too far away.

Hence we are looking for the XBI to move higher, as well as individual setups within the small cap biotech sector to move higher as well.

In addition, should this prove to be correct and the XBI does move higher out of this consolidation, the IBB should follow suit and move to new highs, with individual setups within the large cap biotech sector beginning to move up as well.

Make sure to join us inside the #cowanscorner and the #matrix and add to the conversation!

What do you think will happen in markets? What are you favorite themes going forward? We look forward to hearing your thoughts!

Have a great weekend!

-JP

 

 

 

 

 

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