Biotech Values

[biocqr]

IBB, XBI > My favorite quote from George Soros's favorite TA guy Tom DeMark... "Bottoms are made when sellers stop selling not when buyers start buying". Capitulation requires a washout of sellers accompanied by high volume followed by declining volume on lower prices which is a sign that selling is abating and everyone who was in panic mode to sell has sold...THEN the buyers step in.

I mostly follow IBB but decided to take a look at the XBI as well. I looked at this week and compared it to the prior bottom on Sept 25.

Prior bottom behavior in Sept... The XBI daily avg # of shares that usually trades is around 3.3M. Sept 28 was a big down day for the XBI with high volume of 14.6M shares. The next day Sept 29 the XBI made another low on lower volume of 10.6M shares. The next day Sept 30 was an up day trading 9.7M shares. The XBI rallied 4 straight days after the low of Sept 29. The bottom was in.


Monday Jan 11 the XBI had a big down day with high volume of 14.6M shares traded. Tues was an up day on lower vol of 9.5M. Wednesday was another big down day on 10.3M shares. Today was a reversal day with a lower low in the first 30 mins which had no follow through...selling abated. Then buyers stepped at 10 AM and it was off to the races. Today's vol was almost 11M shares so that's a good sign.

The avg daily volume in the IBB is around 1.7M shares. Capitulation day in Sept was Sept 28 with almost 12M shares traded. Yesterday's volume was only 3.4M but today we had a lower low on low volume then buyers stepped in and we ended up big on 4.3M shares...the biggest volume day since Oct 21. The lack of capitulation volume that we saw in Sept for the IBB tells me the large cap bios in the XBI were really driving this sell off.


In short..the volume and price action on the XBI & IBB says this is a tradable bottom. I can't say it's the low of the year. I'm seeing some negatives on the long term chart that need to be resolved before I can say this bottom is durable. My guess is the likelihood the XBI & IBB have another selloff with a lower low sometime in the future is better than 50/50.