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The Divergence Between These Two ETFs Is Bullish for Biotech
From the Buzz & Banter: Despite this bullish indicator, sentiment towards biotech remains lukewarm.
David Miller    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

As Todd Harrison posted earlier on the Buzz & Banter [subcription required], the iShares Nasdaq Biotech Index ETF (NASDAQ:IBB) broke support at $260. If you pull the IBB chart up intraday, well, ugly doesn't quite describe it. It shows textbook lower highs and lower lows.

What's interesting is the SPDR S&P Biotech ETF (NYSEARCA:XBI), which is the more balanced ETF tracking the Nasdaq Biotech Index, is flat (or nearly so as I write this around noon, EDT). So, it's the big caps taking most of the hurt in biotech land. This is reflected on my screens with the better-known names down and the lesser-known names up or flat.

I've written in the past that this XBI and IBB divergence is generally bullish for the sector, and I'm not parting with that view now. However, I don't just use my eyes on charts. I use my ears, too. My ears tell me biotech isn't the "hot thing" at the moment, and we're getting rotation away from the sector. That hasn't hit the smaller names as it looks like most of the rotation is coming from fast money "renters" and not "owners" who looked to the ETFs and the very biggest biotech names. That can change, and darn quickly, but that's how it looks the moment that I write this.

For full disclosure, I recently added some ProShares Ultrashort NASDAQ Biotech (NASDAQ:BIS) to our portfolio at Alpine Bioventures (a hedge fund) to hedge the sector rotation. This ETF isn't for everyone as it is 2x levered to the downside. When the IBB is down 1%, the BIS is designed to be up 2%. Conversely, when the IBB is up 1%, the BIS is down 2%. I chose the BIS instead of using options for two reasons:

1. I think there will be a break in the biotech indexes that could be meaningful.

2. I'm not certain when that break is coming in relation to the March and April expirations.

I'm just sharing my thought process here in hopes that it helps.

Twitter: @AlpineBV_Miller

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Position in BIS.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

The Divergence Between These Two ETFs Is Bullish for Biotech
From the Buzz & Banter: Despite this bullish indicator, sentiment towards biotech remains lukewarm.
David Miller    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

As Todd Harrison posted earlier on the Buzz & Banter [subcription required], the iShares Nasdaq Biotech Index ETF (NASDAQ:IBB) broke support at $260. If you pull the IBB chart up intraday, well, ugly doesn't quite describe it. It shows textbook lower highs and lower lows.

What's interesting is the SPDR S&P Biotech ETF (NYSEARCA:XBI), which is the more balanced ETF tracking the Nasdaq Biotech Index, is flat (or nearly so as I write this around noon, EDT). So, it's the big caps taking most of the hurt in biotech land. This is reflected on my screens with the better-known names down and the lesser-known names up or flat.

I've written in the past that this XBI and IBB divergence is generally bullish for the sector, and I'm not parting with that view now. However, I don't just use my eyes on charts. I use my ears, too. My ears tell me biotech isn't the "hot thing" at the moment, and we're getting rotation away from the sector. That hasn't hit the smaller names as it looks like most of the rotation is coming from fast money "renters" and not "owners" who looked to the ETFs and the very biggest biotech names. That can change, and darn quickly, but that's how it looks the moment that I write this.

For full disclosure, I recently added some ProShares Ultrashort NASDAQ Biotech (NASDAQ:BIS) to our portfolio at Alpine Bioventures (a hedge fund) to hedge the sector rotation. This ETF isn't for everyone as it is 2x levered to the downside. When the IBB is down 1%, the BIS is designed to be up 2%. Conversely, when the IBB is up 1%, the BIS is down 2%. I chose the BIS instead of using options for two reasons:

1. I think there will be a break in the biotech indexes that could be meaningful.

2. I'm not certain when that break is coming in relation to the March and April expirations.

I'm just sharing my thought process here in hopes that it helps.

Twitter: @AlpineBV_Miller

< Previous
  • 1
Next >
Position in BIS.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

The Divergence Between These Two ETFs Is Bullish for Biotech
From the Buzz & Banter: Despite this bullish indicator, sentiment towards biotech remains lukewarm.
David Miller    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

As Todd Harrison posted earlier on the Buzz & Banter [subcription required], the iShares Nasdaq Biotech Index ETF (NASDAQ:IBB) broke support at $260. If you pull the IBB chart up intraday, well, ugly doesn't quite describe it. It shows textbook lower highs and lower lows.

What's interesting is the SPDR S&P Biotech ETF (NYSEARCA:XBI), which is the more balanced ETF tracking the Nasdaq Biotech Index, is flat (or nearly so as I write this around noon, EDT). So, it's the big caps taking most of the hurt in biotech land. This is reflected on my screens with the better-known names down and the lesser-known names up or flat.

I've written in the past that this XBI and IBB divergence is generally bullish for the sector, and I'm not parting with that view now. However, I don't just use my eyes on charts. I use my ears, too. My ears tell me biotech isn't the "hot thing" at the moment, and we're getting rotation away from the sector. That hasn't hit the smaller names as it looks like most of the rotation is coming from fast money "renters" and not "owners" who looked to the ETFs and the very biggest biotech names. That can change, and darn quickly, but that's how it looks the moment that I write this.

For full disclosure, I recently added some ProShares Ultrashort NASDAQ Biotech (NASDAQ:BIS) to our portfolio at Alpine Bioventures (a hedge fund) to hedge the sector rotation. This ETF isn't for everyone as it is 2x levered to the downside. When the IBB is down 1%, the BIS is designed to be up 2%. Conversely, when the IBB is up 1%, the BIS is down 2%. I chose the BIS instead of using options for two reasons:

1. I think there will be a break in the biotech indexes that could be meaningful.

2. I'm not certain when that break is coming in relation to the March and April expirations.

I'm just sharing my thought process here in hopes that it helps.

Twitter: @AlpineBV_Miller

< Previous
  • 1
Next >
Position in BIS.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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