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Biotech's back in the green

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The Biotechnology Index (BTK.X) has moved back into positive territory this morning and based on recent observation, this type of action (should it continue) bodes well for some firming up in the NASDAQ Composite (COMPX). The BTK.X has held our 19.1% retracement bracket level of 438 and looks to have found buyers from this morning's low of 439. A break above Friday's high of 469.40 would be further signal that this group of stocks is trying to assert itself as a leader.

Amgen Chart - last nine months

Shares of Amgen (NASDAQ:AMGN) look to have found some buyers at our 50% retracement bracket near $57.81. Friday morning we alerted traders in the "market monitor" on OptionInvestor.com that the stock had hit our first bullish target of retracement at $60.71 and short-term traders should have been moving up stops under their bullish trades. It's encouraging to see one of the sector bellwethers finding support on a pullback. This is a very good stock for traders to monitor if their trading other stocks in the group.

Earlier this morning we also noted that the bullish percent reading for the biotechs from Dorsey/Wright and Associates had reversed up into a column of X's at 22%. Amgen will not give a "buy signal" until a trade at $61. A trade at that level would then have the stock giving a "buy signal" and contributing to the bullish percent. Trader's looking long AMGN can do so here with a short-term traders stop just under today's low.

Treasuries see some selling

With mutual fund inflows not seeing a much money come into them on the equity side in recent weeks, traders will need to be monitoring the bond markets. Today we're seeing some selling in the shorter-end of the bond market as the 13-week Treasury Bill YIELD ($IRX.X) rises to 2.33%. We're also seeing some selling in the 5-year ($FVX.X) as YIELD their rises fractionally to 3.776%. Some money seems to be finding its way to the longer-end maturities as both the 10-year ($TNX.X) and 30-year ($TYX.X) YIELDS are fractionally lower.

With the US$ showing just fractional weakness against the major foreign currencies today, there's a good chance we're seeing some rotation toward stocks.

It's my feeling that stocks that have been holding up on a relative strength basis will most likely attract the bulk of money that rotates toward stocks.

Stocks that have traded strong stand chance of leading

One stock that continues to impress bulls and bears is shares of Office Depot (NYSE:ODP). It's a stock we first started making bullish comments on back in mid-July when the stock gapped higher on BIG volume.

Office Depot Chart - last eleven months

With little overhead supply to hold her back, shares of Office Depot (ODP) look like they could spring higher on a break of $14.11. On Monday, September 17th, we thought this might be a stock for traders to be looking long if we saw selling at the open. The stock traded as low as $11 that day and hasn't looked back. Perhaps longer-term bulls were active, or bearish traders had called it quits.

Jeff Bailey
Senior Market Technician
Premier Investor

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