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Biotech's nearing upper end of regression

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Last Thursday, Eric Utley grew some bullish horns for the biotechs and that had me "checking him twice," not in disagreement, but just wanting to see if we could see the same thing that had Eric turning bullish on the group. Here we are roughly three trading sessions later and biotech bulls are doing well and may be looking to take some nice trading profits off the table near the upper end of our regressions channel that we talked about in Friday's 11:00 update.

Biotech HOLDRS Chart - Daily Interval

It's not just some bulls that are cheering today's move, but I also got a few e-mails from subscribers that had been holding some BBH puts from mid-January that locked in gains late last week that are thankful for Eric's "bullish call" in the biotechs. With the BBH reaching the upper end of regression, a short-term bullish trader should be looking to either sell some strength on a nice three-day rally, or snug up a stop just under this morning's low. We'll be monitoring the upper end of regression to see what takes place from here. With MACD just crossing above the signal line, we could see a BBH move that challenges the rolling 200-day MA up at the $125 level. I will make note that the BBH is currently challenging the bearish resistance trend on the point and figure chart right here at $122 and this trend (bearish resistance) did serve as resistance back on January 23rd, when the BBH rallied to the $128 level and hit both our regression trend and bearish resistance, then sold off sharply to the $117 level over the next several sessions.

Jeff Bailey
Senior Market Technician
Option Investor

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