Intermarket Relationship:  

Most market participants are aware of the relationship between interest rates and biotech stocks. These names are dependent on financing to stay afloat and if the ten-year yield is rising it is certainly a headwind. Tuesday it recorded a bullish hammer candle right off the rising 50-day SMA after the bull flag breakout in early April, often a solid entry point. Bears will declare that it nearly reached its measured move to 4.9%. On its WEEKLY chart, it has the look of forming a possible head and shoulders pattern, and notice the bottom of the cup successfully retested a previous double bottom breakout. Something is going to have to give as the XBI, if it can bottom here at this week’s lows could be building the right clavicle on a bullish head and shoulders formation, with a break above a 92.50 pivot that would carry a measured move to 103. Or if by judging by the overlapping PRICE chart of the TNX and XBI sometimes these two instruments can trade in harmony.

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