The Killer B’s: Biotechs and Banks
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Biotech shares are testing support levels, as measured by the NASDAQ Biotech ETF ($IBB) at roughly $336. The chart below shows how the ETF has been hugging that support line, and just how critical it is. A breakdown in the biotech sector would likely send the group lower towards $328, which is undoubtedly not a disaster, but it would be a bump in the road and suggest one of two things. Either the market is becoming risk adverse, or the money is rotating into another sector.
The group’s struggles start at the top, with shares of Celgene ($CELG) struggling since the significant Morgan Stanley downgrade on October 5. For now, the stock seems to be finding support around $136.
Amgen shares seem to be showing signs of life again, after a small pullback.
Gilead also doesn’t look in too bad of shape.
These three stocks, each have nearly an 8 percent weighting in the IBB ETF, and Biogen does too. The big four biotech stocks have roughly a 32 percent weighting in the ETF, so the group is likely going nowhere if these four stock do not get their acts together.
It likes they may be regrouping and getting ready for the next push up.
Financials seem to be benefitting the greatest, and the group is getting set to rise even further. The current trading pattern in shares of the Financial Select Sector SPDR ETF ($XLF) has a nearly perfect pennant /flag formation in it, which means that the ETF is likely to move higher, soon.
Bank of America has completely broken out and is now trading at levels not seen in nearly a decade. It may seem crazy, but shares of Bank Of America could be headed back towards $40, a rise of almost 51 percent from current levels around $26.50
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Netflix may have found bottom too, after its post-earnings slump. It sure looks like it did.
Short-term interest rates are starting to rise, and that means the market is preparing for the next Fed rate hike. Three-month US Dollar Libor is at its highest level in nearly a decade!
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