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Tuesday, June 18, 2019

Market update 6/18 - Best Call Of The month - The Reversal In Biotech Stocks

It seems like all I use this blog for, anymore, is to declare victory, and today should be no different...

Last week - as the broader market continued to trade mostly sideways, and directionless, I started looking for a sector trade. In gold, gold miners, $SOX, Biotech

While I found a bearish trade in $SOX that worked in my favor, I also identified a bullish pattern in the biotech sector - a bullish inverse Head & Shoulders pattern - as seen on the chart below.

This turned out to be the better trade, as short sellers continue to be squeezed into the summer break, as usual.  

$XBI - Bullish inverse H&S pattern highlighted in purple.

$XBI ended up another 4.74% on Monday, while the 3X leveraged Biotech bull ($LABU) ended up a whopping 14.12%! That's what you call "a good trade", any day of week, and especially on light summer volume. While this rally could continue, I expect to see some consolidation at my red line, and I think it's better to "snipe gains" wherever you see them, in this thinly traded market. 

As far as the broader market is concerned, we've seen very little movement since my last blog update. The $VIX continues to hold up, and the market rallies we've seen so far have been short lived, and
I suspect today's little relief rally on Draghi dovishness will be no different.

Never trust summer rallies. The short sellers continue to cover, and it's too easy for the hedge funds to squeeze the retail short sellers out of one stock/ sector, or another.

This morning I'm reviewing the charts and see the #REIT sector was up nearly 7% on Monday!
This looks like short capitulation, in an illiquid market. This is what you expect to see at a major market top!  


We've seem money rushing into 30 year treasuries, and gold, and even Swiss bank accounts. This doesn't give me confidence. The relatively high $VIX remains a cloud over the market, as does the German $DAX - pinned. 

Regardless of my mostly bearish analysis above, we're getting into summer trading, and anything can happen over the next few weeks/ months. We could see the $DAX continue to hold up, and US markets retest the recent highs.

Below you can see the DOW trading into a little upturned triangle pattern - in blue, and bouncing off my stop-hunt - in pink, and OPEX is this week. That alone can hold the market up. But from there I'm still expecting a sharp correction, ahead of the 4th of July.

That's all I got for today, and I have some REIT charts to update this morning.

Follow me on twitter @3XTraders for the latest technical analysis, and real-time updates. 

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