IBB follow up

IBB/NDX Biotechs is what I'd call a screaming head fake set-up, it's all the same concept, the same concept from the April 2nd forecast that envisioned a break above the major averages' resistance in the form of triangles, some of which weren't even fully developed yet, but the clear resistance zone was, which is why I had said a couple of weeks before that there would be no downside move of any significance until there was first a head fake move above that resistance area.

The concepts and reasons behind the concepts which I'd estimate we see 80% of the time just before a reversal and in any asset as well as any timeframe from intraday to several days to a weekly chart. These two posts are always linked near the top right of the members' site:

* Understanding the Head-Fake Move Part 1

* Understanding the Head-Fake Move Part 2

For our purposes I'll add go in to some of the concepts and reasons. the more noticeable the resistance , support or other technical level such as a moving average or a common price pattern, the more likely you'll see a head fake move before a reversal (whether a reversal up or down, it doesn't matter). Also the more popular the asset, the more likely the head fake move. Beyond that, the reasoning for their existence is a bit longer to explain than is appropriate in this post, but it has everything to do with the size of institutional positions and entering and exiting them at the best prices for smart money without attracting attention to the trade and without driving the trade against themselves because of the size of their positions (basic supply/demand dynamics). Ironically it is Technical traders themselves and their predictability and adherence to 100 year old concepts in some cases, that created head fakes.

 This is the daily chart of IBB with a nice up-trend in to 2015 before it puts in one of those changes of character that is "seemingly" bullish, a break above the long term channel,  then almost immediately the price gains end, the change of character led to a change in trend that went from strongly up, to dead flat.

However in this dead flat trend which IBB hasn't broken higher since March and that failed at that, it also created a clean, clear, very obvious area of resistance with the last 3 trading weeks not seeing more than 0.11% movement up until yesterday, a very clear resistance range and a very popular asset.

It would seem IBB's trend to the upside has ended, as there has been no further gains since March 19th, it's kind of a red flag for the group.

However it's a perfect head fake set-up because technical traders who have been following IBB and waiting for a new high, expecting it to return to last year's trend have their buy orders set right above the clear resistance level, a breakout to the upside triggers them, at the same time triggering demand which can be used to sell in to. If a large Wall Street firm wanted to sell IBB anytime over the last 3 months in any size, they'd send prices crashing which isn''t good for an exit or good for a new short entry.

 Here comes today, a perfect break above the trendily,a convincing break for technical traders, one they'll buy, one they'll chase giving larger institutional money the demand they need to either sell or sell short into, both transactions come across the tape as sales.

Note the trajectory of the 6 hour 3C chart, it's not good, but we could have guessed it wouldn't have been good moving forward the moment IBB broke above the long term up trend channel, the change in character.

 Intraday IBB has not confirmed the upside at all.

The 2x leveraged long, BIB shows a small head fake at the yellow line, a stop run just before its reversal to the upside, this is why these head fake moves are such fantastic price-based timing indications, you can see it for yourself on the 16th, a break of support and a gap up the next day as the shares stopped out on the break of support were accumulated for that little move higher, then sold. IBB has been in near perfect confirmation since at the green arrows, not much going on as there's not much room to do anything without setting the laws of supply and demand in motion until today and it looks pretty clear on this longer intraday chart and IBB, a different asset, that it was being sold in to which makes perfect sense because they sure weren't buying it and pushing it higher the last 3 months.

 This is BIS, the 2x inverse or short of IBB on a slightly longer 3 min chart with confirmation as it sees a head fake move below support, a stop run which allows a lot of shares to be picked up on the cheap as stops below support are hit, the 3C chart for the day again confirms with a positive divergence suggesting the stopped out shares in the biotech short were accumulated.

This 10 min IBB chart is interesting, it's about as far as I can go on an intraday/1-day move, but it has a small positive divergence at the white arrow with a head fake move at the same area and then in line trade with one more small accumulation area with the same head fake/stop run right at the second white arrow to the right. Today's move though on a stronger 10 min chart has no confirmation, but worse, it's a negative divergence after so much time of price confirmation in the timeframe.

I suspect it will look worse tomorrow in longer timeframes and Monday and so on.

I'll likely get involved soon.