<<The RollerCoaster of the Biotechnology Index>>
(These are some comments on the Biotechnology Index in response to a posting from bluemarlin on the Biotechnology Valuation thread.)
The Index still remains on a long-term down-trend.:
siliconinvestor.com
This down-trend will be broken when the price is able to get above the average lines,specially when the green or short term average is able to cut and stay above the red or longer-term average (like it did during 1999 until March 2000).
One simple way to tell which way is the trend headed: Look at the inter-relation of the average lines. If the short term (green) average is over the red(longer) average the TREND is UP and you have a GREEN LIGHT, and vice versa.<g>
Also if you print the chart and try to draw a straight line connecting the top of the price bars, you should be able to see that that line remains on a downward slope.<g>
The long-term is the PRIMARY TREND, that is the most important one to know which way it is headed.<g>
Looking at the Index on a "shorter term" basis, so you can see some of the RollerCoaster you mentioned:
siliconinvestor.com
You can see that there were a few "false starts" in the last couple of weeks, when the price was able to get above the green short-term average line, albeit on a very short time span.<g>
The first FS you can see was before 3/12 when the price just got to the red (longer average) line.
On the second FS (just after 3/12)the price did get above the red line,albeit for only 2 hours, but the green average was not able to get over the red one.<g>
On the third FS (shortly after the second) the green average was able to get above the red and the price did stay above the red line for 5 hours.
On the 4th FS, (the one after 3/19) the short average was also able to get over the longer one and the price remained above the red line also for 5 hours.
The next time the price was able to get above the green line (after the index had been more temporarily oversold with the two average lines wider apart)the green or short term average was also able to get over the red one, but notice that after the price was able to go over the green line it remained above it for almost 42 hourly bars (except for about 2 minor exceptions)
Also notice that after the green line was able to get over the red one the price this time has remained above the red line for at least some time during each one of the hourly bars and that the green average stills (barely) remains over the red one.
Also if you print this chart, draw a straight line and try to connect the top of the price bar on March 19 with the top high price before and after it(that line should probably connect with the bottom of the second price dip after March 26)
Now, what can all this "junk" or "tea leaves" reading tell you ?
On a short term basis, a couple of things:
1. There has been a slight change for the better on the short-term trend in the last 10 days. (Remember that the PRIMARY TREND still remains down until proven otherwise.)
2.On that 60 minutes chart that you printed draw also a line connecting the top of the price before March 26 with the top of March 26 and prolong it upwards.(That is your temporary short term up-trend)
3. There are some "support levels" to watch:
The first one is at 446 (that was where the price met some "resistance" for 7 hours before March 26. Notice the little up-gap when it finally was able to get over it.<g>)
The second "support" is around 414 (that is the level where the price was able to cross above the green average line as it was coming from the oversold position)
And the third and "last support" you can see in that chart is at 382 (the bottom price before March 26)
AS those "supports" get broken the short term outlook for the index becomes progressively worse.
4. What about "resistance levels" ?
The first one of course, is just above the 478 level (at the top of the highest price after March 26)
The next one is at the highest price after March 19 and then the highest prices after March 12, that may be close to the intersection of the line that was projected or prolonged from the tops before March 26 (the temporary up-trend line).
Now, also notice that this last one is a somewhat more important level, because that should bring the price close to the average line on the daily chart:
siliconinvestor.com
Bottom line:
Trying to read the "tea leaves" can give you some perspective to better understand the RollerCoaster of the price action. As the price breaks a "support level" or goes through a "resistance point" you can expect some temporary acceleration of the "trend's momentum".<g>
Well, I think all this "junk" is getting a little longer that what I had first intended. To me it has been both fun and profitable to watch the TREND over the years.<g>
Bernard |
