Flash Alert! Big Biotech Breakout To Buy
RoboStreet – June 10, 2021
Bullish Biotech Breakout
Equity markets are in flux, sensing tighter Fed policy will emerge later this year to stem growing evidence of inflationary pressures. There are signs of upward pricing pressures in just about every industry and commodity around the world, the biggest surprise being the torrid rise in crude oil prices. As of Thursday, WTI crude was trading at $70/bbl even after the OPEC and non-OPEC nations agreed to increase supply.
Yield on the 10-year Treasury lowest level since February
Ironically, the bond market doesn’t seem to harbor the same level of nervousness, as the yield on the 10-year Treasury has slid to 1.48%, its lowest level since February. The debate over if and when the Fed will taper monthly bond and mortgage purchases has taken hold of the narrative. Thankfully, so has encouraging economic data that favors the long-term bull trend.
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$SPY short-term between $410 and $425
The technical picture for the market is also a bit fuzzy, semi-directionless while it awaits news on inflation, more stimulus and tax policy. The $SPY continued to trade in the narrow range today. The short-term trading range remained between $410 and $425. The value stocks sold off (XLF, IYT, XHB). The influential technology stocks continue to chop in a tight range.
The $DXY has retested the recent lows. The $TLT continued to trade higher. The $SPY short-term support level is at $403-$410. The SPY overhead resistance is $423. Even if the $SPY is able to trade above the $423 level, the market can only make incremental highs until there is more clarity on key topics with big market moving potential.
I would consider rebalancing portfolio at this point to be more market neutral. I expect the second wave of the sell-off to restart as early as this week or next.
Based on our models, the $SPY can pull back 10-15% from the all-time highs in the next 2-6 weeks. Based on our models, the market (SPY) will trade in the range between $388 and $425 for the next 2-4 weeks.
Be it up, down or sideways markets, there are always opportunities to make money, but it requires having a system in place that can discern what the market cares about and what it doesn’t. This is true of the big picture issues as wall as individual stock and ETF selection.
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Biotech sector start to show up within our indicators
Our AI system is always thinking, always learning, and always crunching data 24/7 to ferret out the best profit-generating opportunities. One of them that is starting to show up within our indicators is the biotech sector, specifically the SPDR S&P Biotech ETF (XBI) that represents the best proxy for the sector.
The ETF has widely diversified with the top 10 holdings make up less than 10% of total assets. There are 192 holdings of which 100% are U.S.-based companies.
What is interesting about the chart pattern of XBI is the sudden emergence of the shares up and through its 20, 50, and 200-day moving averages on a big spike in volume that is triggering our interest in this trade.
Our AI platform gives XBI a Model Grade “C” rating, which is neutral, but gaining favor as more signals are turning bullish. Shares of XBI trade at around $135 and the latest Predicted Resistance price target is up at $162.36, or about 20% above where the stock currently trades.
Depending on further confirmation from our AI tools, we might well be recommending XBI to our RoboInvestor members in the coming days, which might behoove readers of this column to join up and get in on this and other compelling trades. We publish a bi-monthly newsletter that is delivered over the weekend with two new recommendations to act on when the market opens Monday. We harvest profits when our AI signals determine when to do so and maintain a constant portfolio of roughly 15-25 positions at any given time depending on market conditions.
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And remember we’re not talking about day-trading here.
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