The following is an excerpt from my latest Weekly Strategy Session, which I published on Sunday for members (12631 subscribers receive the Strategy Session each weekend, at no additional cost).
Speaking of RSI divergences, we had previously observed the negative weekly chart RSI divergence to price on the leading biotechnology sector ETF, IBB. The biotechs have been clear market leaders throughout this year and indeed over the past several quarters, housing tons of momentum and institutional capital.
Last week, however, they ran into some very heavy sell volume, despite a late-week bounce. Individual high-fliers, such as ACAD AEGR ALNY AMRN ARIA CLDX NPSP all faced particularly steep sell-offs, perhaps indicative of a notable change in character in the sector.
Even if the biotechs do not fall apart here, major players like AMGN BIIB CELG GILD VRXare sporting charts deemed too sloppy to consider them as actionable long trading setups headed into this week. Should the bounce late-last week result in a rollover, the larger biotechs become more interesting as short ideas in the coming weeks. To my eye, only a V-shape year-end performance chase can push them to new highs.
Smaller plays like ONVO may still be viable as long ideas on an individual basis which, again, speaks to the general thesis of staying selective in the market.
But, on the whole, the biotechs are showing signs of aging after a very steep multi-quarter run.
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