Biotech: When and Where to Sell
It was an impressive turnaround on Tuesday for the stock market as, after Monday’s drop, the short-term momentum appeared to be turning negative. Of course, to keep the positive “Mo” going, we need to see further gains Wednesday. A drop back below Monday’s lows will turn the focus back on the downside.
The S&P futures are flat in early trading and the EuroZone markets are flat to a bit higher. There is plenty of economic data for the market to digest today, including; the ADP Employment Report, PMI Services Index, and the ISM Non-Manufacturing Index.
The transportation stocks rebounded sharply as one of the railroads I focused on yesterday, Union Pacific Union Pacific (UNP) was up 3.8%. The small-caps were also up over 1% while the iShares Nasdaq Biotechnology (IBB) gained just over 2%.
This, of course, has been one of the best sectors in 2014, as IBB is up 35.4% YTD after a 65% gain in 2013. Many of the large biotech stocks like Amgen Amgen Inc. (AMGN) and Regeneron Pharmaceuticals Regeneron Pharmaceuticals are up over 50% in 2014.
Though the long-term trend shows no signs yet of changing the 10-20% correction, last spring took many longs out of the market. The sector’s seasonal tendencies can be used along with price targets to determine levels where partial profits could be taken. Additionally, there are two under the radar biotech stocks that are just completing monthly bottom formations.
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Chart Analysis: iShares Nasdaq Biotechnology (IBB) has total assets of $6.5 billion with an expense ratio of 0.48%. The ETF has 117 holdings with 58.6% in the top ten holdings.
IBB reversed sharply from the October low of $247.86 as the quarterly projected pivot support at $250.60 was slightly violated.
IBB had a new daily closing high Tuesday with monthly projected pivot resistance at $320.11.
The weekly starc+ band is at $323.41.
The move through the resistance at line a, has upside targets in the $340-$350 area.
The seasonal tendency is for IBB to bottom on June 20 (line 1).
This ETF typically peaks out on January 9 (line 2) while a broader biotechnology sector tops in early February.
Last year IBB topped the week of February 28.
There is first good weekly support in the $285 area.
The SPDR S&P Biotech ETF (XBI) has total assets of $1.36 billion with an expense ratio of 0.35%. The ETF has 82 holdings with just over 18% in the top ten holdings.
XBI had a high last Friday at $184.16 as the daily starc+ band was tested.
The weekly starc+ band is at $193.12 with the monthly projected pivot resistance at $195.62.
The relative performance has been in a solid uptrend since July.
The RS line is now close to the February 2014 high but has not yet confirmed prices.
The weekly OBV moved back above its WMA one week after the October lows.
The OBV formed a clear negative divergence at the February highs (see arrow).
The OBV is above its WMA but is still well below the highs from early in the year, line e.
Monday’s low was $174.26 with the 20-day EMA at $173.25.
There is more important support now in the $164 area.
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Nektar Therapeutics Nektar Therapeutics (NKTR) is a $2.1 billion clinical stage biopharmaceutical company that is already up 46.78% YTD as it has been hugging its 20-month EMA, which is now at $11.43.
The November close was above the 2010 high of $16.06 as it was strong all last week.
The weekly close was above the starc+ band.
The monthly projected pivot resistance and starc+ band are in the $19.77-$19.90 area.
The resistance from 2004 and 2006 (line a), is in the $21.30 area.
The monthly relative performance closed at its highest level since 2012.
The monthly OBV closed in November above its WMA.
There is long-term OBV resistance at line d.
The monthly pivot is at $15.66 with the 20-day EMA at $14.98.
The monthly projected pivot support for December is at $14.05.
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Biotech: When and Where to Sell
