It is getting interesting in the stock market: biotechnology stocks are attempting to break out.
It has been quiet for a long time in biotech space. Very recently, we wrote Biotechnology Rated Neutral To Bearish because of the fact that biotech continued to trade in a sideways range for more than 1.5 year as seen on below chart (IBB ETF).
There was a Breakout Attempt In Biotech Stocks some 2 months ago, but that failed.
Interestingly, there have been several attempts in 2016 to break down but those ones failed as well. We wrote over the course of last year that Biotechnology Stocks Are Refusing To Break Down and Biotechnology and Health Sector Testing Long Time Support.
So many tests of resistance but also support in some 20 months time, they all failed.
The million dollar question is whether this breakout will be for real. How to know?
Typically, a breakout needs at least 5 consecutive days of trading about the breakout point. Today was the first day. Investors can check the IBB ETF; the 300 points level is the breakout point.
We definitely see a possibility that biotech will break out because of the solid setup in the last 3 months. Note on the chart how IBB ETF did not go below 280 points since March of this year. That is bullish.
The flipside of this bullish story is that we are entering the summer period. As said before we see our Market Barometer Suggesting Serious Volatility As Of Summer 2017. There is always a chance that our forecast will not be correct.
In case our forecast would come true there would probably not a long window in which biotech will rally. At least, that is how we look at things at this moment in time with the information currently available.