Keep and Eye on the Bio-Techs
Last Friday’s key reversal day which saw stocks rally hard in the morning but close below Thursday’s close, was likely driven by high flyers like the bio-techs which broke down and could see more profit taking until they reach strong support.
The Biotech Vectors ETF (US:BBH), sliced through support near the 50-day movign average near 98.91, and is poised to test the 100-day moving average near 92.09. The next level of target resisatnce beyond the 100-day moving average is horizontal trend linesupport near 84.50. Momentum on the BBH is negative with the MACD (moving average convergence divergence) index printing at its lowest level in the past 6-months reflecting accelerating negative momentum.
The BBH spread relative to the NASDAQ 100 shows that the spread between bio-techs and the large Nasdaq 100 index could decline further down to support with a spread near 0.024.
Bio-techs are likley to move higher initially and then experience another round of profit taking. Once support has been reached for these market leaders, Nasdaq bulls should be confident in getting back into the tech heavy index. Until this is accomplished, traders should stay on the sidelines.
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