Biotech Bonanza?

The XBI registered its third best daily performance Monday of 2020 (Tuesday it eased above its 50 day SMA), and its best in more than 5 months, gaining 6.9%. Volume came in powerful as well, reaching double the average, and its best in more than 8 weeks. As a whole the group has been a bit under the weather, but as we possibly witness some rotation into this space, one has to respect the fact that it would be rallying in the face of Washington speaking of controlling drug prices. It is most likely election rhetoric, and investors have to utilize the belief “that was is comfortable is rarely profitable”. On 9/4 the XBI did just what it needed to with a bullish hammer off the very round par figure, a number that was significant resistance dating back 2 1/2 years. Conventional wisdom states that once that thorny resistance is taken out to the upside, it normally becomes support. It did just that after originally breaking above 100 in May in June, and a couple weeks ago. At the very least investors now have a very visible exit point, with a good risk/reward scenario.

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