Friday, October 02, 2015 4:52:34 PM
IBB D WYCKOFF
Here is a chart of IBB that was first published in July (click here for link). With the reverse use of trendlines we see a throw-over condition. The Automatic Reaction (AR) is larger than the price corrections in the uptrend, indicating that selling is intensifying. With the AR identified, we backtrack to the prior peak to determine if it has BCLX qualities. We now suspect that a BCLX occurred, resulting in one of two conditions; a Stepping-Stone Reaccumulation or a Distribution. Patience is required here, as it will take time for either condition to mature into a new trend. Biotech is one of the most loved investment themes of this bull market, therefore we know that it will take time for the C.O. to Distribute all of their biotech holdings. Biotech stocks are heavily owned by institutions this cycle. If and when the institutions fall out of love with this group, they will sell stock rapidly. IBB is a proxy for the activity of the entire group and thus this ETF is ideal for Wyckoff analysis. We can assume that one of the most dominant themes of this bull market to date has sizable C.O. Sponsorship. The push to a new high above the BCLX price peak is a classic place for C.O. selling, so it is very important that prices maintain these new highs. Failure back below the Resistance line could cause a cascade of selling, and it does with expanding price spread and rising volume. UTAD price failures often break quickly to the Support Line. In this case a Major Sign of Weakness (SOW) forms with an extreme break of the Support line prior to bouncing back into the Distribution area. This example illustrates our point that a break below Support indicates that large sellers are present, and that Phase D or Phase E is forming. We don’t need all of the labels to draw this conclusion. The Support Line drawn from the AR low being dramatically broken tells us much. Now we can go back and try to label the prior key points. Also, the rally to the second LPSY provides an opportunity to sell IBB shares.
Here is a chart of IBB that was first published in July (click here for link). With the reverse use of trendlines we see a throw-over condition. The Automatic Reaction (AR) is larger than the price corrections in the uptrend, indicating that selling is intensifying. With the AR identified, we backtrack to the prior peak to determine if it has BCLX qualities. We now suspect that a BCLX occurred, resulting in one of two conditions; a Stepping-Stone Reaccumulation or a Distribution. Patience is required here, as it will take time for either condition to mature into a new trend. Biotech is one of the most loved investment themes of this bull market, therefore we know that it will take time for the C.O. to Distribute all of their biotech holdings. Biotech stocks are heavily owned by institutions this cycle. If and when the institutions fall out of love with this group, they will sell stock rapidly. IBB is a proxy for the activity of the entire group and thus this ETF is ideal for Wyckoff analysis. We can assume that one of the most dominant themes of this bull market to date has sizable C.O. Sponsorship. The push to a new high above the BCLX price peak is a classic place for C.O. selling, so it is very important that prices maintain these new highs. Failure back below the Resistance line could cause a cascade of selling, and it does with expanding price spread and rising volume. UTAD price failures often break quickly to the Support Line. In this case a Major Sign of Weakness (SOW) forms with an extreme break of the Support line prior to bouncing back into the Distribution area. This example illustrates our point that a break below Support indicates that large sellers are present, and that Phase D or Phase E is forming. We don’t need all of the labels to draw this conclusion. The Support Line drawn from the AR low being dramatically broken tells us much. Now we can go back and try to label the prior key points. Also, the rally to the second LPSY provides an opportunity to sell IBB shares.
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