The 2015 Boom and Bust for Biotechs and Healthcare

09/30/2015 7:00 am EST

Focus: ETFS

Corey Rosenbloom

Founder and President, Afraid to Trade

Corey Rosenbloom, of AfraidToTrade.com, takes a technical look at two ETFs in the biotech and healthcare sectors that were among the biggest laggards for the day on Monday and suggests traders note the current levels, the rapid transition from a strong to a weak trend, and the current volatility in these funds.

In Monday’s big sell-session, Biotech and Healthcare stocks were among the biggest laggards of the day.

Let’s take a look at the strong rally in 2015 that gave way to a bust or reversal recently.

We’ll Start with the Biotech iShares ETF—IBB

chart
Click to Enlarge

A strong rally in July—continuing a strong uptrend through 2015—occurred on reduced volume into $400 per share.

From there, price simply retraced to the rising 50 EMA—nothing unusual—and then broke impulsively under this level at the beginning of August on high sell volume.

When the market collapsed, Biotechs collapsed with it, falling from the $400 peak to spike reverse off $300.

A logical and expected ABC retracement pushed the ETF back into the underside of the falling 50 EMA at $360, but the trend took a turn for the worse when shares collapsed last week on increasing sell volume.

At this point, we’re seeing an oversold rally develop off the $290.00 spike low and an upward pathway potentially opening up toward the $330.00 pivot again.

Nevertheless, focus your attention for the moment on $290.00 and $300.00 per share.

The Situation Is Similar in Healthcare (XLV):

chart
Click to Enlarge

Likewise, shares peaked in July on reduced bullish volume into $77.00 per share in the XLV ETF.

From there, all seemed well—except for the pick-up in sell volume through August—until shares tumbled three fateful days in a row in August.

A mini-flash crash collapsed the price toward $57.00 for a brief moment ahead of a similar ABC retracement toward the underside of the falling 50 EMA.

From there, shares began a renewed tumble lower on the highest volume bars of the year.

XLV shares are pivoting higher off the $64.00 level potentially toward $68.00 if we’re seeing another V-Spike reversal.

Either way, note the current levels, the rapid transition from a strong to a weak trend, and the current volatility in these funds.

By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com

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