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Is This Why Biotechs Are Tumbling: "Head And Shoulders Top" Spotted In The NBI
While no chart could have possibly predicted the populist outcry against Martin Skreli's widely publicized, and panned, decision to crassly boost the price of a Toxoplasmosis drug by over 5000% (doing something all other biotech companies have been doing but with all the grace of a bull in a china shop thus prematurely ending the party for everyone) only to promptly undo his decision following a furious public backlash which also resulted in Hillary Clinton proposing a price cap on specialty drugs and unleashing the worst drop for biotech stocks in 2015, now that concerns about a biotech top are in play, the biotech sector just can't seem to catch a bid, and as of moments ago was down over 3% dragging the Nasdaq just barely positive for the day even with the S&P up 0.8%
One reason for the continuied weakness may be that, as Bank of America points out, there are signs the dreaded head and shoulders top has appeared in the Nasdaq Biotech Index.
While on its own this would be completely irrelevant, as fundamentally-driven investors would be quick to object, the fact that it is none other than technicians and chartists who have been instrumental in pushing biotech stocks to their recent nosebleed levels, it will be the same "chartists" who will be scrambling at any bearish signals on the way down (furthermore, for the biotech sector where for 90% of the companies it is all hype and technicals, there is no "fundamentals" to speak of).
Such as this one.
More from BofA's Stephen Suttmeier:
Biotech struggles & shows signs of a head & shoulders top
The NASDAQ Biotech Index (NBI) shows signs of a distribution top with the risk for a deeper pullback. Unlike pullbacks in 2014, the August/September 2015 drops have struggled to hold the 200-day moving average (MA). The rally from late August looks corrective and has stalled with the 200-day and 50-day MAs at 3638-3801 starting to act as resistance. We cannot rule out a head and shoulders top and pushing below 3410-3380 would break the neckline and uptrend line from 2014 to confirm this pattern. This would suggest deeper risk to 3181 (August low) and then 3000-2860. It would take a break above 3828-3902 to completely negate the risk of a head and shoulders top.
NBI is weakening vs. the S&P 500 & leadership at risk
The NBI is weakening relative to the S&P 500 and is a market leadership group at risk. The group could experience a deeper correction within a long-term relative uptrend.
Some furhter stock-specific details:
Alexion (ALXN)
ALXN has stalled on an absolute and relative price basis. The relative ratio vs. the S&P 500 did not confirm the new highs for the stock in late 2014 and early 2015. ALXN is testing big support at $155-150 and should this give way, the risk is for a deeper drop to $140-136 and potentially $120. The $180-185 area provides initial resistance.
Amgen (AMGN)
AMGN has broken below key support at $152-147, placing the uptrend from 2011 into focus near $140. Should this give way, AMGN could see a deeper drop to $128-127 and then $110. Holding below $156-160 keeps the immediate bias bearish.
Biogen (BIIB)
BIIB remains risky with a big downside gap that is acting as resistance. While below chart resistance at $327-338, the immediate risk remains for a decline toward $250 and potentially below. BIIB is at risk for a big breakdown relative to the S&P 500.
BioMarin (BMRN)
Filling the June price gap suggests upside exhaustion. BMRN shows signs of a top and has started to weaken relative to the S&P 500. The big support comes in at $118-111, where a decisive break would confirm a top and set up a deeper decline to $100 and then $84-80. It would take a break above $133-137 to improve the pattern for BMRN
Celgene (CELG)
CELG has filled the mid-July price gap to suggest upside exhaustion. While the absolute and relative price trends are still up, the rally off the August low has stalled with risk for a retest of supports at $106 and $96-95. Additional support: $87-83. The chart pattern for CELG is risky while below $125-130.
Gilead (GILD)
GILD shows key support near $100. A failure to hold would set up a deeper drop to $92- 91 and $85-84. It would take a move above $113-117 to firm up GILD’s chart pattern. GILD/SPX is still bullish but that would change if GILD broke $100 and the relative ratio confirmed the break with a loss of the early Sep low and uptrend line from late 2014.
Illumina (ILMN)
After gapping down in late July, ILMN has weakened and shows signs of a top. The key support is $183-179, where a decisive break would confirm a top and favor a deeper drop to $157-145. This move would likely break key relative support that goes back to early 2014. Holding below $200-214 keeps us concerned about ILMN’s chart pattern.
Incyte (INCY)
INCY is stronger chart among the 10 Biotech charts we are highlighting. The near-term key is holding chart and uptrend support at $113-109. Should INCY lose this level, it would increase the risk for a drop to $101-96 with additional support near $87. The relative ratio for INCY vs. the S&P 500 is still strong but correcting.
Regeneron (REGN)
REGN is holding up better with a stronger relative ratio vs. the S&P 500 than many other Biotech names but the stock shows an exhaustion gap and may be forming a head and shoulders top. A sustained break below $495-482 is the catalyst to confirm this pattern and set up a deeper decline to $433 to $390. Resistance comes in at $544 to $570.
Vertex (VRTX)
VRTX has weakened to break support at $114-113 with the next support at $103.75. Resistance is building between $125 and $137 and rallies that do not regain this area keep us concerned about the chart pattern for VRTX with the potential for a deeper decline toward $88-87. The relative ratio for VRTX is pulling back within an uptrend and confirming the recent weakness in the stock.
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Finally, should the biotech weakness extend and drag the Nasdaq lower, not even the technical buying predicted by JPM's head quant yesterday may be enough to keep the broader market bid up for the remainder of the day.
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Stretch.
Lots of money in mind control pills, excuse me pills to treat "illness".
Diabetes and cholesterol meds aren't going anywhere - the shift however is toward generics.
Not much new under the sun in terms of helping fat lazy people avoid the consequences of not changing their fat lazy lifestyles, I'm afraid.
Cholesterol lowering drugs have been one of the biggest frauds pushed by the pill pushers ever. And you are right that Type II Diabetes can be prevented or even reversed if caught early enough by a simple diet change.
Eating two carrots a day will lower your cholesterol about 40% so why take pills unless you are an exception? Yes, organic carrots are expensive but better then drugs.
As an aside, that research discovered two carrots a day will also lower your risk of colon cancer by 40%.
Not bad!
cooked, raw or doesn't matter?
Consider that source. It is probably more like 1-2%
Biotech has actually suffered from their own PR. They keep making big promises but not delivering. They need to decide not to act like Silicon Valley......
nothing $5 Trillion and -5% won't break that Shoulder....there is no charting
Very interesting remarks on a stock level but the index as whole does not make any profit!
"there is no "fundamentals" to speak of"
True. That makes them interesting shorting targets when the time is right....
wake me up when crAAPL and FB shit the bed.
Am I the only one that noticed the 3mo bond has gone negative?
Did it 2 days ago as well. December rate rise? Not a chance. 6m is hovering around 0 as well. Next year is the election. No rate rises for at least 15 months.
I have long argued for several years that , in this current environment the only thing that will save ones financial ass is to invest in things that people cannot do without even in a recession or depression. It is not oil , it is not gold, it is not even food(fertilizer for example). There is plenty of oil in our life time at least. Food is important but try to make a dime in the crowded fertilizer field, super market or resturnats you likely will see your investment decimated.
The only thing that is safe to invest in is medicine, particularly in companies that holds patent to a one of a kind drug that patients cannot do without.(The alternative is death).
Todays biotech rout is a good buying opportunity but youy got to know what ot buy. Imagine there is a company that just proved in its clinical trial its drug works in reducing cancer recurrency rate to almost zero whereas 85% untreated patients see their cancer return in a year. Imagine the FDA just asked the company to meet with them, very possibly wanting to help them fast rack the drug to the market. Imagine the most conservative estimate of the drugs sale is north of $ 6 billions a year for this one drug. Imagine the company has another drug that is even more advanced and have similar sales potential. Imagine this company is partnering with Roche/Genetech. And imagine, thanks to short attack, the market has mispriced the company to the tune of a market cap of only 0.275 billion.
The name ? GALE. The advice ? None because I am only a retired professor of molecular biology in cancer and not a financial advisor.
…imagine a government canceling your patent or setting the price of your wonder drug at an "affordable level"…imagine unicorns with skittles flying out of their asses...
LOL, Canceling patent and dictating price worldwide ? Last I check we are still keeping the appearnace of a democratic country.
I can lead a cow to the water but I cannot make her drink. When opportunity knocks you are taking out garbage at the back.
A FOOL AND HIS MONEY. falling knife. why not wait until the carnage runs its course?
Markets going off the cliff here at 210pm: What's the news TD?
http://www.investing.com/indices/us-30-futures-advanced-chart
H&S just completing right shoulder on the SPX on the 1-month. Breaks neckline at 1900. Initial target plummet 1820-1860. Time frame: within 5 days. Technically perfect so far. They tried to squeeze it above 1940 on the SPX futures but failed...
Pretty much the "last squeeze" occurred overnight (EVERY good crash has a "last squeeze"), and now it's just crash from here. GLA.
( And if you want a "news" reason apart from "because the levered debt is imploding", how about "because Yellen wants to raise rates into a deflationary economy)
Did Gartman come out this afternoon to state that he is pleasantly bullish biotech? And that he has been stopped out of tankers and sand?