Saturday, September 27, 2008

Biotech ETF Looking Bullish

A few months ago we saw the biotechs showing relative strength as can be seen by the rising ratio line from May going into June. What followed was an explosive rally in July. You'll notice in the above chart that the MACD triggered a buy signal in early July which turned out to be quite profitable. I believe we are seeing the same pattern take place right now.

In the above chart of XBI (biotech ETF) you'll notice that the market appears to be bottoming at the 200 day moving average. In my opinion this is significant and is very bullish. The ratio line is rising which indicates that the biotechs are stronger than the overall stock market and the MACD has just triggered a buy signal today.

I think we are going to see the biotechs move higher in the weeks to come and my upside objective is a test of the August highs.

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