Sunday, May 01, 2016

Biotechnology (XBI): Let's Make Sense Of This Pathetic Hoedown

I've been holding off on commenting on Biotechnology(XBI) because it's movement has been confusing to say the least. Lots of counter intuitive moves have been made over the last three months. The week of the called off merger, for instance, between Allergen and Pfizer the index did quite well. A false breakout of the large declining channel took place this week but I surmise a proper breakout in the next week. Support might be found around $52.75 so it can put in it's final higher low to complete the bearish wedge shape currently being made. It could alternatively break through support at $52.75 and $51.00 but I find this unlikely as some of the indicators such as RSI (5) and Full Stochastics (5,3) are already oversold.
My advice for people playing the Biotechnology Index would be to hold-off until the support line has been confirmed. If the second breakout continues it could rise to $58.00, but what happens then remains to be determined.