From Dana Lyons: A popular biotech ETF is testing potentially formidable resistance on its chart.
Last week, we noted that the a key index of internet stocks was encountering a potential “triple top” on its chart. Of course, if such an interpretation was accurate, it could make for some tough sledding in the internet space. Today’s Chart Of The Day highlights a similar situation in the biotech sector, specifically on the chart of the popular SPDR S&P Biotech ETF, ticker, XBI.
As with the internet index, XBI has formed a potentially ominous triple top, with parallel peaks around the $98 level in January, March and June.
Like we mentioned in the internet piece, should these three peaks hold as resistance, resulting in a true “triple top”, it could have serious implications for the price of XBI. Based on the pattern, the measured downside for the fund could range anywhere from about 26%-33% below the peaks. Of course, if it breaks out above the “triple top”, it’s a completely different story. So obviously, that $98 level bears close monitoring.
Which will it be? We don’t have a crystal ball, but in a Premium Post at The Lyons Share, we dig a little deeper into the chart to assess what we think will be the most likely resolution. We also detail how to best take advantage of this developing situation.
If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!
Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.
The SPDR S&P Biotech ETF (XBI) was unchanged in premarket trading Wednesday. Year-to-date, XBI has gained 14.28%, versus a 4.94% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Dana Lyons, JLFMI and My401kPro.