If you want to skip the entertainment below and get straight to the punchline: XBI has been in a steady uptrend and recently experienced a pullback. It looks like the drop has stabilized so I’m going to jump in and try to ride it back higher.
However, if you want to read on for what too often passes for trade analysis, feel free to keep going…
Obligatory Macro Environment Analysis
Trade war jitters are yet again on the table as the most likely cause cause of the pullback. Of course, maybe you just had a bunch of people decide to take profits, which lead to a cascade of sell orders from algorithms and monkeys. Honestly who knows but we just experienced a risk-off period that created a buying opportunity for us.
Chart Analysis of Questionable Value
I could draw a bunch of random lines on the chart to pretend like they show support and resistance levels. News flash: they don’t. But the chart below clearly shows the classic technical pattern called Satan’s Snowball setting up. It’s one of the lesser-known chart patterns.
Obligatory comment on what’s driving sector support
XBI should stay fairly insulated from all the nonsense and noise coming out of Washington. XBI is US-focused and represents a lottery ticket for a lot of investors. The only thing XBI has to contend with is if people think the multiples they’re paying are ridiculous or we hit a risk-off period and drug pipelines and massive acquisitions at giant multiples are abandoned. But hey, that’s next year’s worry. Not this week’s, which is where we’re playing with this trade.