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Biotech Stocks are Getting Ready to Breakout
8Baller and I covered this chart late last week, and it looks coverage worthy again, as the SPDR S&P Biotech ETF(XBI) is preparing to break to the top of its recent range with a move above $88.
The biotech sector has been the strongest-performing widely traded ETF over the last month, gaining 11.5% against the Invesco QQQ Trust Series 1's (QQQ) 1.8% return for the same month. That's not a typo - biotech has been tearing it up!
The XBI benefits from one thing as a group: they are the most widely shorted group of stocks out there.
On average, the short-interest ratio for the XBI is around 7.0. This means there is potential for a longer-term short-covering rally to settle in on the XBI.
I'm trading the XBI for a quick break above the $88 to $92, as volatility and a technical breakout help build more momentum.
Alphabet Inc (GOOGL)
Shares of GOOGL surged last week, as the company held its developer's meeting and awed the crowd with the number of times executives said "AI." Of course, new phones and other goodies were unveiled, but it's AI that has the market going nuts.
The rally took shares of GOOGL well above their top Bollinger Band, which suggests one of two things will happen...
- The stock will consolidate just above the $115 price while the stock's volatility readings come back to earth, or...
- The stock will regress to the mean to get back inside of the volatility bands.
Historically, the latter happens, as GOOGL shares average a pullback of about 4.5% within the first ten trading days of similar breaks above the top band. Those returns happen about 58% of the time. The other 42% results in consolidation.
I'm targeting a move back to the $110 as a buying opportunity.
Tesla Inc (TSLA)
Last week's announcement that Elon Musk would be stepping down as CEO of Twitter was met with a sigh of relief and some buying of TSLA shares. The buyers may be a little too quick to jump in though.
Keep in mind, Tesla is a high-end consumer discretionary stock.
And according to analysts, we're seeing the high-end consumer cut their spending faster than other consumers.
Another big factor working against Tesla is the high interest rates and lower demand continuing to hang over companies that sell high-ticket products.
TSLA shares are threatening to fall below $165, which would target another move to the $150-$152 level. I'm trading this using an at-the-money June expiration put.
The post This Sector's Poised to Rally At Least 10% appeared first on Penny Hawk.
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About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.