Much Can Happen Between Now and Memorial Day

The following is just a small excerpt from my latest Weekly Strategy Session (please click on that hyperlink for details about trying it out). which I published for members and 12631 subscribers this past Sunday. 

On May 30th, 2014, in Chicago, Illinois, the American Society of Clinical Oncology (ASCO) will have its annual and widely-watched meeting. Given the steep, multi-year rally we have seen heretofore in the biotechnology stocks, sentiment is understandably quite bullish on the sector headed into the meeting. Indeed, many individual firms in the biotech sector are making bold progress in the medical space.

With this in mind, it is crucial to draw a distinction between promising, long-term progress in the medical field for the benefit of humanity versus the stock market price action of the sector.It is also worth remembering that the market has demonstrated time and time again over the past one hundred years or so that it is capable of looking ahead several months, if not quarters and years, and “pricing in” good news.

First and foremost, the amount of time between now and ASCO is, in some respects, an eternity, in terms of what the market is capable of doing over that given period.

Beyond that, these Strategy Sessions have been focusing on the uniquely extended nature of the biotech sector, at-large, in recent weeks. The suggested strategy was to look for opportunistic short trades for the sector as a whole, in addition to the large cap, liquid biotech stocks comprising a heavy portion of the sector ETF.

Updating the daily chart for the main biotech sector ETF, IBB, note the sheer size of the sell volume bars dating back several months. While that volume pattern, in and of itself, is not sufficient evidence to call a major top to the sector’s exhilarating bull run, it ought to give buyers pause when we consider the sector’s underperformance to the broad market last week.

Moreover, the sector ETF has not so much as tested its 200-day simple moving average in roughly the past sixteen months. Hence, the odds of a true price correction materializing–with each surge in sell volume as price has become abnormally-extended–increases dramatically.

BIS is the ultra-short sector ETF for the biotech sector. Aggressive traders may seek to play the bear side with a move under $259 on the IBB ETF next week, with a stop-loss if the ETF takes out recent highs of $275.40 on a closing basis. 

There are two more points about the IBB ETF worth considering.

First…

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Vmware over $104, up and out of the tight bull flag highlighted on the first daily chart, below, is a long idea for Tuesday. The stock has been sneaky strong, under the radar of late.

And Groupon remains a short idea, especially below $8.30 and considering the overall corrective nature of its daily chart, second below.

Drop me your top tickers overnight.

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If you enjoy my blog posts and videos, then I would encourage you to please click on this 12631 hyperlink for more details about joining our great team of traders at a very reasonable price. 12631 is a trading service which @RaginCajun and I direct here at iBankCoin.

Enjoy tonight’s video, and enjoy your evening. 

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“F***ing Greeks” -Paul Vitti, mob boss.

NBG continues to outperform, as Greece has been hot lately (GREK is the FTSE Greek ETF basing high and tight on the daily chart).  Italy has been a spicy meatball of late, as well.

While names like PLUG are getting tons of momentum attention keep an eye on these mediterranean plays as well.

See you after the bell for my video market recap.

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The 30-minute small cap ETF chart, first below, shows false breakouts and false breakdowns along the way as price ha been pulling in some since last week. Watch to see how this resolves, if at all, into the final hour.

If resolution is higher, BAS M have two of the better charts out there right now, both basing high and tight as long ideas.

Drop me your top final hour tickers.

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The potential bear-to-bull reversal is often a tedious process requiring tons of patience, one which I written about extensively over the years.

Two examples of candidate for the major bear-to-bull reversal have been GRPN SKUL.

The first goal for bulls is to see price stop going down, then base out. Eventually, price should move up and out of the base with daily chart moving averages rising and starting to properly-align. This process is filled with tons of random gaps to either direction, with generally frustrating price action for all but the quickest and most fortunate of traders.

The next gap cementing a major “higher low” after the movement up and out of the bottoming base.

Recently, Groupon failed to put in that major higher low, while Skullcandy has been more successful.

Take it one step at a time, and never assume the reversal has been proven true until you see “the last good higher low.”

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