Some thoughts about biotech. (May 11, 2015)
In this video I want to look at biotech. On the surface, on the daily chart, it looks okay, right? But there are a couple things: first of all let’s get some relative readings here; I’m going to zoom out, forget about the moving averages, they won’t matter in a second; I’m going to the monthly chart. You can see how this has just gone parabolic, now we go arithmetic, which kind of compounds things. This kind of trajectory simply can’t be sustained.
Now, I’m not saying that the IBB has peaked at 380.00 and is never going to go above that. Look what happened back here, the IBB peaked at 275.00; it took it six months to get back to that level. It pulled back from the high to the low, in this correction, about 25 percent from here. This little red bar to this one, we’ve got 1.3 years, we’ll say from the low here to the next low we’ve got 1.1 years. We can go here and basically kind of have the same thing.
So what do we have here? From this low to really this high, eleven months, twelve months. So basically, from a temporal standpoint, which is a fancy term for time, this little pullback is right on time. Now, had you sold biotech and looked away, never looked back, you’d have missed out on one heck of a run. So I’m not saying sell biotech and go away and never look back, this is not Sodom and Gomorrah, you can look back and you won’t get turned in to a pillar of salt. By the way, who knows, maybe Wall Street is Sodom and Gomorrah, I don’t know.
But anyway, lets move back in to the real world here and go back to the daily chart. This is what I’m talking about; I think the IBB peaked here. Since this move we’ve had what, almost two months, so this has been trending down. You haven’t made any money here. Now look, to be honest, it’s hard to make money in the market these days. Look, the S&P, it’s just drifting sideways. If you find this market really easy to trade, congratulations, you’re the one, there’s always one, I guess it’s you.
This is a tough market to trade and what I’m saying is, you want to be real careful about biotech right now, and think, well it’s still okay, look at it, it’s back above it’s 50-day moving average. It is, but this is a little shot across the bow. Also, look at MACD, moving average convergence/divergence, it’s basically the distance between two moving averages and then the average of that distance trend and momentum indicator; it’s drifting lower, so this is actually confirming these lower highs.
Now there are certain biotech stocks that you can be in, I was going to just put those in the member section here, but I’m going to take a little extra time and go through all of them for you. By the way this is the kind of stuff you get at “Stock Market Mentor” in the premium version, basically every day. So IBB, you just have to be careful. If you want to buy some stock go ahead and buy the IBB but have a stop in place; I just think it’s going lower before it goes higher.
Look what’s happened to Alexion ( NASDAQ:ALXN ); the stock breaks down, you decide, I’m going to buy this, this is a great buying opportunity. Fine, that was a one-day wonder, it went up day and then the following day it peaked and actually closed lower than the open. Once these stocks break they break hard. Celgene ( NASDAQ:CELG ) is still hanging in there but look at the transition from above the 50-day moving average to below the 50-day moving average. If this thing doesn’t move higher in a hurry, things are going to get real sporty in a hurry, as soon this falls, if it does fall below the 200-day moving average. I have some short calls on this stock, I’m long the stock, so I don’t really care either way. But frankly, I’d like to see the thing go lower, because I want to make money on my call position.
Juno ( NASDAQ:JUNO ), “juno” that this stock broke down right here, it’s never recovered. Now I’ve mentioned this many times before, when you see something like this, this is a specific news event, I forget exactly what it was, honestly I forget, it had something to do with their immunotherapy industry basically; some other company, and I know 112 people are going to send me an email telling me what the name of the company was, sorry, I just forget. But anyway, so it kind of drove everything down. Well look at the volume here, this was twice average volume so then as time marches on this stock never gets back to where it was before.
Once biotech breaks it break hard. Kite Pharmaceutical ( NASDAQ:KITE ), the same industry as Juno ( NASDAQ:JUNO ), this is also drifting lower. This was the top, look at where this is on the 15th; that peaked before the IBB, right, by almost two months. So this kind of gave you a little forecast of things to come. But not all biotech, you don’t just want to throw the baby out with the bath water, but you want to throw a lot of babies out.
But look at this, Biogen ( NASDAQ:BIIB ), this was a big blow off, a break down, and now this is not yet breaking higher. This is one you have not missed your opportunity to sell; you should have sold up here but I’m telling you after this key breakdown, this failure to move any higher, it’s oversold. You can see this, but this has got a lot of resistance above it, I just don’t think you want to be long. Now Gilead ( NASDAQ:GILD ); Gilead ( NASDAQ:GILD ) is still basically working. So you compare this GILD, to the IBB. This is printing lower highs, it’s more volatile, where as Gilead ( NASDAQ:GILD ) is really starting to look a little higher. The 50 and the 200-day moving averages are very tight together.
What you want to be doing is, you want to be looking for a move above this level, and that’s when you want to buy it; that would be 107.50. If the stock pushes above there then you can consider this all one big gentle touch and go, boom! There’s the blastoff, that’s Gilead ( NASDAQ:GILD ). Now, Regeneron ( NASDAQ:REGN ) is also working. Again, compare this with IBB; lower highs, where as Regeneron ( NASDAQ:REGN ) is really leaning right up against this high here. So this one, as long as it stays above the 50-day moving average, you’re good.
Illumina ( NASDAQ:ILMN ), as opposed to aluminum, not quite as good technically as Regeneron ( NASDAQ:REGN ) or Gilead ( NASDAQ:GILD ), in my view, because this shows a lot of potential. But Illumina ( NASDAQ:ILMN ) still really works, staying above the 200-day moving average, these are oscillating, getting a little bit tighter it seems like, so this is one. If this thing starts moving above 200.00, and I’ll set a price alert for members, but you can set this in your own software, I’ll show you how on stock charts.
We have an alert system within “Stock Market Mentor” that if our alert is triggered then you get that portion of the video that I’ve done that covers this. So I’m setting this for a month, I will just get this personally if Illumina ( NASDAQ:ILMN ) goes above $200.00, and if it does that that’s really my buy signal. And then the last one is Amgen ( NASDAQ:AMGN ); choppier but higher lows here. So you look at Amgen ( NASDAQ:AMGN ), you look at Illumina ( NASDAQ:ILMN ), you look at Gilead ( NASDAQ:GILD ), you look at Regeneron ( NASDAQ:REGN ), these are all stocks that you can own.
These others, like Juno ( NASDAQ:JUNO ) for example, this is a broken stock. It may wind up going to all-time highs, but it isn’t going to be because of the technicals, it’s going to be in spite of the technicals. So just know which biotechs you are holding; this is not like the old days when everything biotech went up, I mean you didn’t really even have to know biotech, or even really know charting very much to make money, just buy anything in the biotech sector and you’re going to do pretty well; it’s not that way anymore.
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