Biotech About To Deliver Another Buy Signal

Biotech has been in a daily uptrend that has been characterized by highs forming above the upper daily cycle band and lows forming above the lower daily cycle band. Biotech formed a daily swing low on Tuesday. Forming a swing low above the lower daily cycle band indicates a continuation of the daily uptrend and signals a cycle band buy signal.

Biotech closed higher on Wednesday, running into resistance at the converging 10 day MA and 200 day MA. A close above the converging MA’s will indicate a continuation of the daily uptrend and will signal another cycle band buy signal.

Biotech Buy Signal

Biotech delivered a buy signal on Tuesday.

Biotech has been in a daily uptrend that has been characterized by highs forming above the upper daily cycle band and lows forming above the lower daily cycle band. Biotech formed a daily swing low on Tuesday. Forming a swing low above the lower daily cycle band indicates a continuation of the daily uptrend and signals a cycle band buy signal. Long entries can be entered with a stop at Monday’s low.

Biotech Buying Opportunity

Biotech has been leading stocks out of the recent cycle low.

Biotech became a bit stretched above the 10 day MA on Friday. Biotech retraced Monday and Tuesday, tagging the 10 day MA on Tuesday. Biotech is currently in a daily uptrend. If Biotech forms a swing low above the upper daily cycle band then that will indicate a continuation of the daily uptrend and signal a cycle band buy signal. A break above 124.64 will form a swing low.

Biotech Delivers Bullish Follow Through

On Saturday we noted how Biotech is the early leader out of the daily cycle low. On Tuesday Biotech delivered bullish follow through.

Prior to the June low, RSI 05 was in a bearish pattern – embedding in oversold and quickly reversing once overbought. That is changing. RSI 05 is beginning to embed in overbought – which is characteristic of an intermediate cycle advance. That aligns with Biotech being in daily uptrend. Biotech will remain in its daily uptrend unless it close below the lower daily cycle band.

Bullish Divergence

Stocks formed a swing low and closed back above the 10 day MA on Friday.

While Friday’s develop is encouraging that day 19 was the DCL, stocks remain below the 50 day MA and is in a daily downtrend.

The Nasdaq also had a bullish Friday but remain below both the 10 day MA and the 50 day MA.

The Dow formed a swing low and closed back above the 10 day MA on Friday. But remains below the 50 day MA and is in a daily downtrend.

The Russell also formed a swing low and closed back above the 10 day MA on Friday. But still remains below the 50 day MA and is in a daily downtrend.

I discuss in the Weekend Report how stocks appear to have formed their daily cycle low, intermediate cycle low and is in the process of forming the yearly cycle low. This decline into the YCL has been difficult and sentiment became very bearish. We need to keep in mind the best opportunity for gains follow a yearly cycle low — which appears to be forming. And Biotech is the early leader of the pack

Assuming Leadership

Stocks are seeking their daily cycle low.

The S & P formed a swing low

The Dow formed a swing low

The Nasdaq formed a swing low and closed above the 10 day MA.

The Banks have yet to form swing low

The Semi’s have yet to form swing low

Not only did Biotech form a swing low, they closed for a 2.5% gain on Friday.

With Biotech breaking out of a multi year consolidation they are indicating a readiness for assuming market leadership.

A Potential Change Of Leadership – Update

Back in April we looked at how Biotech was emerging as a new market leader. Tonight we will look at this further.

The daily equity cycle peaked on Wednesday, formed a swing high formed on Thursday, then stocks closed below both the daily cycle trend line and the 10 day MA on Friday to signal the daily cycle decline.

Notice:
1) Stocks did not even break above the 200 day MA prior to beginning the daily cycle decline.
2) Stocks printed a lower low on Monday, but ended up 0.42%

The Semiconductors were similar to stocks. They also peaked on Wednesday, formed a swing high on Thursday, then closed below both the daily cycle trend line and the 10 day MA on Friday to signal the daily cycle decline.

Notice:
1) The Semiconductors closed below the 200 day MA on Friday.
2) The Semiconductors printed a lower low on Monday, but ended up 1.03%.

Biotech also formed a swing high and closed below the 10 day MA last week to signal their daily cycle decline.

Notice:
1) Biotech was well above the 200 day MA and did not even come close to it during this pullback.
2) Biotech formed a swing low on Monday, rallying for 3.02%

The relative strength is very apparent.

Additionally:
Biotech is in a daily uptrend. The swing low formed above the lower daily cycle band to signal that Biotech remains in its daily uptrend and has triggered a cycle band buy signal, with the stop being placed below Friday’s low.

A Potential Change Of Leadership

 
We have beed discussing the semiconductors on and off since they were breaking out of their multi year consolidation back in April of 2019.

The Semiconductors have been leading the market higher for the past 7 years

But on a day where stocks here down 1.79 %

and the semiconductors were down over 2%

A potential new leader may be emerging.
Biotech closed higher on the day.
And are closing in on their all-time highs.

And once they break above their multiyear consolidation I believe that they will challenge the semiconductors for leadership.