Biotech Boogie:

Growth investors admire strong uptrends and like to see stocks in close proximity to 52 week or all-time highs. We know trends in either direction, are more likely to persist than reverse themselves. That poses a dilemma when tradeable instruments are acting weak, especially in the face of a strong overall market. The biotech sector here could be a good example. The XBI now trades 23% off most recent 52 week highs, and there has been some collateral damage on the powerful descent. Former leaders that have dug themselves deep in the graveyard include SRPT, NBIX, SGEN, and even AMRN which plunged 13% Tuesday on the strongest volume in 9 months. The XBI as a whole is making a stand here at its still rising 200 day SMA. Many stops are placed around the widely watched moving average, so trade can be volatile. In the last 5 weeks the ETF has recorded some powerful candlesticks. Wednesday it demonstrated decent follow-through after Tuesday’s bullish harami pattern rising 2.5%(CLOSED off sessions highs). It was accompanied by soft volume, but that is often the case at potential, nascent turnarounds, where belief is in limited supply. The brave that establish positions in this area may possibly see strong reward in the coming months. As Howard Marks declared “all great investments begin in discomfort. One thing we know is that there’s great discomfort today. (in biotech)”.

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