Is Big Biotech Ready To Fail?

I watch and trade this tape everyday. We’re down almost 100 $SPX points from the top, so what I like to do is go back and look at all the stocks that I wished I had shorted at their tops. This is an exercise that can only be done in hindsight. It can be a tortuous exercise,  (brings out all your subliminal trader self loathing) because it makes you feel like numbnut, but it puts me on the alert for other names or sectors that may be in for the same fate.

Tonight I looked at names like $HD, $AAPL, $PCLN, and $APC. The list is endless, but that is a sampling of names that I wish I had hit short. Most of those names I had an opinion on and wanted to short, but for whatever reason I never pulled the trigger. Some I shorted for a day trade, but nothing meaningful.

There is a modicum of “top calling” (or wishing) when you do this, I don’t try to do either, but it does put that sector or stock right in the bulls eye of my radar. There is nothing wrong with anticipating an outcome as long as it’s backed up with some work. As traders, we anticipate outcomes with every trade.

I study several hundred stocks a night, as well s ETF’s and I am now watching $IBB (iShares Biotech Index) with interest as a potential short set up. I like this set up because I know my risk reward and it fairly well defined.I haven’t entered this short yet, but I will watching tomorrow and Friday.

The top 10 holdings in IBB are: $ALXN, $AMGN, $REGN, $CELG, $GILD, $BIIB, $TEVA, $PRGO, $VRTX and $MYL.

I have reviewed all of those 10 stocks on their respective charts, A few are strong a few have been smacked pretty good and a few look toppy to me, so basically a mixed bag of nuts.

As I always say, some charts look like Picassos until they don’t and IBB has frankly acted better in this tape then I thought it would.  Maybe this wont validate to the downside, but I am watching. The hourly MACD has crossed lower and now I am waiting for the daily to confirm. Current market conditions also drew me to this. The tape is overdue for a bounce, so this idea may become a non event, but it’s one to keep an eye on.

If I go short my stop will probably be placed at the 127-128 level.

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