After yesterday's move in biotechs which we covered in the
Daily Wrap yesterday as an example of "selling in to strength" as biotechs got started on a bounce before the rest of the market or the expected bounce in the rest of the market, this is what we have the morning after.
This is a very long term 4 hour chart. The areas where Biotechs are in line or confirming price action are above the green arrow, the area where biotechs are seeing a change in character and a flow of funds out start at the red arrow. Remember this is a big picture/highest probability primary trend.
On a more useful shorter term 30 min chart, you can also see the areas of confirmation of the price trend and where that goes south. The yellow trendline would be my minimum bounce target making this a trade that comes to us, but we do want to confirm negative divergences in to that bounce which we saw yesterday on the sector's 1.7% gain.
The 5 mi chart shows the bounce base, in line at first and as we start to cross the yellow trendline, note the change in character of 3C. This is also what we saw on shorter term charts posted yesterday.
This is a very detailed 1 min chart including yesterday's activities and bios are lagging today.
This is what I expect to see in a "sell in to strength" move.
The SPY is close to making or starting a similar move. The divergence for the base we have been watching for just about a week is still intact...
This SPY 3m chart shows the decline on a negative from a rounding top to the far left, the first truly oversold condition and positive divergence launching a move higher that seemed to be cut prematurely on the 8th as we saw some very unusually early negative activity sending the SPX lower in to our second base area.
Yesterday I posted this chart of what looks to be a bearish Descending triangle...
The triangle is the right size for a consolidation/continuation pattern from December to present. This is a very familiar price pattern for technical traders, which is why I suspect it's what is being targeted as technical traders are predictable in how they'll react, which is used against them.
The gist of Technical Analysis says this is a bearish continuation pattern that "should" break support and make a new leg to the downside, this is decades old dogma, close to a century actually. TA also says, if the price pattern fails , for instance an upside breakout, traders should reverse positions and go long, which is how head fake moves are set up based on Technical Traders' predictability.
This is why I posted the price pattern yesterday and as you can see we have the small base for the move and we are near the breakout level.
I fully expect to see the same kind of selling in to strength in the major market averages as we are seeing in IBB (NASDAQ Biotechs) above... thus patience, "Let the trade come to you".
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