Quick Biotech (NASDAQ) Follow Up

I find it more than a little ironic or coincidental that Friday of last week I had just posted, NASDAQ BIOTECHS / IBB with a few excerpts...


"I haven't put out many recent updates for biotechs as they have just become too parabolic to consider chasing ... on to Bios and not just because they are having an ugly volatile day..."

To put a bow on it, basically I was saying I hadn't covered Biotechs in a bit because there didn't seem to be anything at the moment on a tactical basis worth pursuing and I sure as heck wasn't chasing that bubble. However, something was starting to change and that post of Friday was "Taking notice".

I also see that the biggest revenue producer on the NASDAQ Biotech Index (75% of the companies have NO EARNING AT ALL) GILD had a death due to one of their or there Flagship drug. Apparently the drug makes up HALF of GILD's revenues as the NASDAQ Biotech Index is trading at a P/E of 50. That may be a bit of a game changer when the biggest revenue producing company in the Index just reports a drug that represents half or their revenues has had 9 patient s sick and one of them dying.


From Bloomberg, 

"(Bloomberg) -- Gilead Sciences Inc. said nine patients taking its hepatitis C drugs Harvoni or Sovaldi along with the heart treatment amiodarone developed abnormally slow heartbeats and one died of cardiac arrest. Three required a pacemaker to be inserted."

This was 2:36 p.m. Saturday 3/21/2015. 

It seems there may have been some insider knowledge being traded on, which is a small part of what is interesting or developing in NDX Biotechs, but nonetheless worthy of noting...

The GILD charts may not be screaming insider trading, but something was going on at that time...

 This 1 min chart went from a small accumulation area to a very sharp leading negative divegrence on the 19th and in to the 20th, I believe the patient actually dies on the 20th.

While it may not look like a smoking gun, this 5 min chart just dumped (3C) before the price decline on the news, heavy distribution.

As for the NASDAQ Biotech Index itself, not a whole lot will have changed on the charts that are less than a day old from the link posted above, however there are some changes...

 Friday's candle and parabolic move on that kind of volume looks very much like churning as well as a bearish candle, although not technically a "Dark Cloud Cover".

The intraday chart has deteriorated more and I think you can see pretty clearly that the move in yellow looks like a head fake/distribution event in fact it looks like a textbook version of one.

Still the trend has been strong and there's likely a lot of money to unwind, thus I'd prefer to see it break the Trend Channel that has held this most recent move in 2015 which was at a stop of $347.50 on a closing basis Friday, but as I mentioned in the post from Friday, the Trend Channel will continue locking in gains or moving higher even if GILD consolidates or drops in the next day or so.

So here's the updated Trend Channel stop on a closing basis for today.

It's a dollar higher at $348.50 and the stop is drawing ever closer with what already looks like a distribution event and some major valuation problems already present and likely those are going to get a lot worse with this new GILD trouble, a drug that I have seen advertised a LOT recently.

On a side note, I don't know why, but in the many years of having been in the markets, for whatever reason I've noticed when a company is advertising heavily, something bad is just around the corner.


Like many of you, I'm VERY interested in this sector so I will be staying on top of it. I would like to see the Trend Channel break first and the Channel Buster which now looks like this...

This is the channel since April 2014, note the peeling away from the trend and the pop or Channel Buster above, this is the "Seemingly" bullish price action that precedes nearly all stage transitions. Typically with a Channel Buster, once the parabolic move starts to fail on the broken channel, they move very fast to the downside and break below the bottom of the channel.