Biotech stocks and the Biotech Sector have been a volatile space for investors this year. One month they are rallying, the next they are pulling back and bearish.
Right now, the Biotech Sector ETF (NASDAQ:IBB) is the latter. The Biotech Sector (IBB) has fallen around 10 percent in the past 2 months. So what’s next?
Let’s look at the daily and weekly chart for IBB with DeMark Indicators.
DeMark indicators are on the verge of creating some meaningful headaches for IBB bulls.
On a daily time-frame, Biotech bulls can hang their hat on the fact that there remains an active TD Countdown Buy 13, but there are only 5 more days for that signal to be confirmed (by way of bullish “Price Flip”). Meanwhile, a new TD Buy Setup has started (Bar 2 in green) and, more worrisome, the price is pretty close to TDST Level Down at $101.36 (dotted green line). A break below that, let alone below the Countdown Buy 13 “Risk Level” at $98.73 (a/k/a secondary exhaustion level), would mark a meaningful change of character for this group.
IBB Biotech ETF Daily Chart
In a vacuum, daily charts are important because they offer tradable levels. But when a similar message is shown on longer time-frames, such as the case for the weekly chart of the IBB, it is time to question the investable thesis around a security. Things aren’t dire yet for the IBB weekly, but they are heading in that direction. A break of weekly TDST Level Down at $96.83 would clear the way for the bears.
IBB Biotech Weekly Chart
Lastly, and just to underscore the potential risks for IBB biotech longs, on a monthly time-frame there’s a confirmed TD Sell Setup 9, and the Countdown Sell indicator is on bar 12 of 13.
Mix the worrisome technical setup with the ever-growing noise for price controls and other assorted political non-sense, and it is not hard to make the case that a nasty re-pricing of the entire group may be in the offing.
Disclosure: I’m short the IBB against a basket of mid and large cap biotech names that I am long.
Good luck and good trading!
Twitter: @FZucchi
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
