Biotech Sector (IBB) Signals Downtrend Not Over

The S&P 500 has bounced nearly 8 percent over the last 8 trading days giving many investors hope for better days ahead. Perhaps a return to the BTFD days of 2013-2014?

Before going all in, it’s important to look at the broader market and not just the major stock market indices reported by CNBC, etc.

The epic rally of recent years was driven by momentum stocks in the technology and biotech space. Companies like GoPro (GPRO), Biogen (BIIB) and Bluebird Bio (BLUE). But those momentum darlings have not bounced to the same extent as the major indices.

So why should we be concerned with Biotech stocks?

The biotech sector, as represented below by the Biotech ETF (IBB) has taken a serious beating lately and there is a lot of chart damage to be overcome before calling for a resumption of the bull market. This chart needs to repair itself through time and price.

We’re currently seeing a death cross on the chart along with plenty of resistance at $330, $340 and $350.  A death cross is a bearish development that occurs when the 50 day moving average crosses under the 200 day moving average.

Any further weakness in this sector could see the broader market follow suit.

Biotech Sector ETF (IBB) – Daily Chart

ibb biotech sector decline not over_market signals october

Thanks for reading.

 

Twitter:  @OptiontradinIQ

No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

Sign up for our FREE newsletter
and receive our best trading ideas and research