Prudent Pause?
The biotech group always seems to be climbing a wall of worry. Incoming administration, drug pricing, etc. Through all that the space seems to grind higher. The chart below of the XBI has run up 35% from its 9/4 kiss off the very round par number. It has recorded some healthy shakeouts along the way, including a 5% combined drop during the 2 weeks ending between 9/25-10/2, and a 6.6% decline weeks ending between 10/23-30. Is it ready for yet another small downturn? It now stands about 10% from its rising 50 day SMA, as much as it has been in some time. The fund is looking for a 5 week winning streak depending obviously on Fridays CLOSE, but some ominous candlesticks have been recorded. PRICE is by far the most important indicator, but the candles are suggesting there is a decent probability of a slight drawdown. The well balanced XBI, with its top component in MRNA representing just more than 2% of the fund has registered some wild action this week already with a range of 48 handles on 12/1 alone. The volatile action suggests fatigue in the prevailing direction. We still like the space but have your watch lists ready to take advantage in leading names.