The 2015 Boom and Bust for Biotechs and Health Care

Sep 29, 2015: 10:21 AM CST

In yesterday’s big sell-session, Biotech and Health Care stocks were among the biggest laggards of the day.

Let’s take a look at the strong rally in 2015 that gave way to a bust or reversal recently.

We’ll start with the Biotech iShares ETF – IBB

A strong rally in July – continuing a strong uptrend through 2015 – occurred on reduced volume into $400 per share.

From there, price simply retraced to the rising 50 EMA – nothing unusual – and then broke impulsively under this level at the beginning of August on high sell volume.

When the market collapsed, Biotechs collapsed with it, falling from the $400 peak to spike-reverse off $300.

A logical and expected “ABC” Retracement pushed the ETF back into the underside of the falling 50 EMA at $360, but the trend took a turn for the worse when shares collapsed last week on increasing sell-volume.

At this point, we’re seeing an oversold rally develop off the $290.00 spike low and an upward pathway potentially opening up toward the $330.00 pivot again.

Nevertheless, focus your attention for the moment on $290.00 and $300.00 per share.

The situation is similar in Health Care (XLV):

Likewise, shares peaked in July on reduced bullish volume into $77.00 per share in the XLV ETF.

From there, all seemed well – except for the pick-up in sell-volume through August – until shares tumbled three fateful days in a row in August.

A mini-flash crash collapsed the price toward $57.00 for a brief moment ahead of a similar “ABC” Retracement toward the underside of the falling 50 EMA.

From there, shares began a renewed tumble lower on the highest volume bars of the year.

XLV shares are pivoting higher off the $64.00 level potentially toward $68.00 if we’re seeing another V-Spike Reversal.

Either way, note the current levels, the rapid transition from a strong to a weak trend, and the current volatility in these funds.

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Corey Rosenbloom, CMT
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