There is one useful way to determine when a trend is over and that is using a 50% "speedline" of a move.
The decline from $400 in IBB, the IShares Nasdaq Biotechnology Index Fund back in July 2015 and then tumbled 40% to $240 on February 9th, 2016 and later retested $240 on June 27, 2016.
The mid-point of that decline is $320 and a line drawn from the top at $400 down through the $320 level on June 27th gives you a line that is now down below $275 and that line has been violated to the upside, retested and is turning back up again and THIS TIME it is with President Trump pushing for faster "time to market" in exchange for lower drug prices. Will the deal go through and will it make a difference? Time will tell.
For now, the Yellen-Bubble-popping bear market has been dramatic since August 2015 as it tumbled a whopping 40%.
But there might be signs of life here in Biotech Bubble land, even with fears of price gouging still lingering over these stocks .
For now: Average in over the next 2-3 months and see if this story pans out.
Tim
12:31AM EST February 2, 2017 280.42 last IBB. Other symbols for Biotech FBT, XBI, BBH
Kommentar
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The obvious upper trendline violated this week and there is a reaction to that level here today 2/8/2017 (Wednesday). The rally in this leg reached well above the "Highest Low Trendline" that I prefer to use that gives a stronger insight into whether a trend is in place or not.
I am constructive about IBB here on today's 2 point pullback. Add to positions here and on new highs and on each "average range advance".
Kommentar
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Still very constructive chart formation. I added again to my position when it was down over a point today. 2/24/2017
Kommentar
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IBB fell all the way back to the "TRUMP KEY LEVEL" from his "I will help drug companies push drugs through the FDA faster...
Very constructive here...I got back in on Friday near the lows luckily, as you pointed this one out again. Very promising outlook.
Cheers.
coolingla
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Excellent post as always Tim!
IvanLabrie
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This is looking awesome.
Mertz74
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Great thought... Plus they are trading at 11x Fwd EPS (for whatever that is worth) probably one of the lowest multiples in the market for a growth sector.
timwest
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@Mertz74, Excellent point about 11x's Fwd EPS. Incredible. If the companies that have been ripping off customers after jacking up prices 10-fold could somehow be removed from the analysis, then we could get a baseline PE. Either way, thank you.
IvanLabrie
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Great chart Tim!
timwest
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@IvanLabrie, Thanks Ivan. I just re-read all of my comments here on Biotech from over a year ago and the "basing out" comments from last fall. I originally thought a 50% correction was coming over 5 years, but we got 40% in 1 year. Time will tell if we can LIFT off of this level that we have been sitting at for awhile.
A-shot
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@timwest, I remember that chart! And that run. What i wonder is ...why not a same run in the same fashion? Biomed is a hot subject, we are developing things faster, and it does seem like a thing of the close future. Also if we speak patterns, it does resemble a similar pattern of a run up, correction, and a second leg up in the same ratio. We are expecting the same from the breaking tech like Tesla
timwest
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@2use, The group of stocks in this portfolio might not be the ones that have the next run-up. So, I'm always wary. The P/E analysis needs plenty of research too to confirm. If you get any research done in the sector, please share it with us here. Thanks @2use
kenny1924
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I just did a Put Sell on this last week, but instead I should have bought the OTM LEAPs on them! Its OK. Making small amount cause now the Put Sells are definitely going to guarantee to stay in the pocket! Good recommendation and great chart. Your chart is showing that it might not be too late to do the LEAP calls after all. In a Trump era, we will see money flowing into biotech with a research in America, make in America and sell to the world concept.
Cheers.