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Biotech's will most likely be NASDAQ's leader

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Last week we felt the Biotechnology Index (BTK.X) was one group that was acting well relative to the NASDAQ Composite (COMPX) and late last week, this group tried to assert some leadership. That leadership failed to present itself on Friday and the NASDAQ lagged the Dow Industrials (INDU) and the S&P 500 (SPX.X). Today's trading in the Biotech Index (BTK.X) is fractionally lower and we're keeping any eye on the 438 level today to see if that level can serve as support.

Biotechnology Index Chart - last nine months

Retracement from the March lows to June highs gives traders and investors some levels to me monitoring or using in their buy/sell decisions. The bullish percent data from Dorsey/Wright and Associates shows that the bullish percent for this group has reversed back into a column of X's at 22% bullish after having reached a level of 72% bullish back in June of this year. Using the retracement bracket and bullish percent data gives hint that this group of stocks will have a "buy side" bias as long as things stay above the 438 level. Often times, the first couple of groups that see reversals higher on their bullish percent charts become near-term leaders where gains can become larger should the broader markets improve.

Earlier this morning we mentioned that the NASDAQ-100 bullish percent had reversed higher and into a column of X's. If you're a NASDAQ stock trader, then the biotechs are most likely the place to be looking for bullish trades.

Jeff Bailey
Senior Market Technician

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