Sector Rotation - Long Biotechs - Amgen, Inc. (Public, NASDAQ:AMGN) ; Celgene Corporation (Public, NASDAQ:CELG)

Sector rotation as the markets correct, biotechs a defensive sector is starting to gain momentum.

Last night we said we wanted to swing AMGN on a BO of the base at $52.00. This morning it popped on the open out of yesterday's C&H pattern. It paused at $52.00 and carved out NRIBs on 5 minute timeframe before extending the full measured move (100%) of C&H pattern. I locked in half and holding the balance with a stop at $51.00.

Next level of resistance on daily is 200 SMA, followed by $56.00.


On the CELG daily chart above, I was looking for an ambush setup after the late May - early June thrust. CELG retraced 50%, printed some NRBs, so I was able to see an entry at the base from the blue line segment.

As you can see from the 5 minute timeframe below, the CELG trade is much wider than AMGN. It was about 30 cents shy of retesting the upper fib. line, so I expect it needs to consolidate a bit before breaking out to the next level.

N.B. - The POT trade we talked about last night was foiled when Germany's largest potash producer reported disappointing earnings and guided lower for the year. The whole Agchem sector went into a black hole on the open and POT barely got a bounce at key support - $97.50 -$97.00.

Technical Picture - Bears Own It

Another distribution day for the major markets which all sold off on accelerating volume. The NASDAQ held at gap support, but the rounded top foreshadows further downside to come. Gap closure, should provide short-term support on the NAZ. The S&P tried to bounce off of support but only managed a shallow intraday retracement before the bears took over the close.

I expect prices to find a short-term bottom tomorrow, after which we fall into the OPEX trade. So I will be looking at key support levels such as POT $105-106 for long entries in early trade tomorrow morning. If POT carves out a reversal stick in my spot, I then target 108-110 as a retracement trade. Don't force it, don't chase it, and don't try to catch a falling knife.




AMGN early strength on analyst upgrade with new target of $65. Also like the daily here as a defensive sector play on potential market weakness.


RIMM was a failed BO. I should have shorted the failure but I thought with earnings out tomorrow Thursday, it might just trade sideways.

CNQ gap turned into a fade - short the h pattern.

SOHU was a HCPG target trade.

Technical Picture - $USD Rises - Commodities Fall

Another distribution day in less than one week. So, tomorrow's edition of IBD will say that the market outlook is "under pressure". We are still holding support of 20 EMA which has held on closing basis throughout the rally, but that will change very soon.

VIX gapped up and rallied.

$USD opened strong and spiked into a solid base (blue line segment), poised to retrace higher.

Transports, commodities, materials and gold all much lower on stronger dollar.

A couple of fast trades shortly after the open to capitalize on dollar strength.

Technical Picture - Weekend Update

The S&P did very little this week, except on the weekly timeframe, where it managed to close above the January reaction high for the first time. However, a mere 2.5 points on low volume is nothing to get excited about.

The NASDAQ has a much more interesting pattern development as we see the beginning of a bearish rounded top, which could be part of a bigger pattern such as a H&S top. Wednesday's hanging man has yet to confirm so we need to see further weakness follow through and not just some more sideways chop.



Notice how the $USD has yet to close above the downsloping 20 EMA. Maybe we go lower before we can move higher. Watching this one closely.


Gold approaching oversold as it moves in to retest the wide base.


NBI consolidating nicely before the next leg up.

Interesting note in IBD this weekend with respect to the IBD 100 - leading stocks. A number of the leaders took big hits this week. Also the IBD 100 fell 2.1% on the week.

Here are the top 10 under $100 with ADV (avg. daily vol.) of 500,000 or more which I'll be adding to my focus list to enhance ATR (avg. true range) - FUQI, VPRT, GMCR, STAR, LFT, NTES, SYNA (42% short float), SNDA, INT, and TRLG.

Technical Picture - Breakout Fails to Hold

The S&P gapped higher as an extension of yesterday's late day strength. Positive data helped push prices to recent range tops, then we paused to consolidate and broke out midday. The midday BO was on relatively light volume and quickly retraced followed by higher volume profit taking in the last hour.

Watch today's opening gap as a potential area of support for tomorrow.

The VIX held the blue line segment as support again today.

Support & Resistance - SPY, AGU. CNQ

Agchem broke out today. We talked about this sector setup earlier in the week. Sterne Agee boosted the sector this morning, initiating AGU with a Buy and a tgt of $62.

The S&P finally broke out of it's trading range from a sloppy C&H. After edging above $96.00, the SPY couldn't hold.

CNQ from the HCPG trading list. The BO point (daily spot) was $59.00. After the successful retest of the base, it's time to get long.

Cautious trading at these extended levels. I shorted AGU and CNQ when it became obvious the bears would own the close for a change.

Technical Picture - Box Play - Day Eight

The markets gapped up in the wake of overseas momentum, but it quickly turned into a fade as anticipated, when the VIX bounced on the first test of support (blue line segment). Up until the last two hours of the session, we had a wide range bearish engulfing stick, but institutional investors continue to buy pullbacks which accounts for the large number of late day rallies in recent weeks. Still today's bar is the widest of the eight day trading range touching the upper boundary and coming close to the lower boundary.

We have a golden cross between the 20/200 DMA's. Normally, crosses are lagging indicator's, which occur after price has taken out the most recent support/resistance. So this cross is suspect in that we've been range bound for an extended period of time.


A reader pointed out after yesterday's post that the VIX is in a clear downtrend and wanted to know if I saw an impending reversal. No, I don't see an impending reversal, but there are small clues and divergences starting to creep in signaling that the rally in stocks is exhausted. That's not to say the VIX will reverse. It will likely be low key throughout the summer doldrums, notwithstanding a major catalyst.

But as long as we continue to see late day rallies, it signals that institutions are buyers at these levels. Why? Because most institutions were not fully invested for most of the V bottom rally, now they are window dressing for Q2. We are still in a bear market until we can take out and hold the January reaction highs on the S&P on a closing basis.

And finally, if we do break higher, we need the financials to participate. One other clue that I'm watching for is high volume pullbacks from leading stocks. Over the weekend, we mentioned that GOOG and AAPL had carved out 9 successive higher closes. This week they are pulling back, but volume thus far, has been average.