The last few months has been frustrating bulls and bears alike. Most breakouts have failed, if not immediately soon thereafter. Breakdowns for the bears have been equally as exasperating. While there has been a bit more success being on the short side, for the most part with a few exceptions (software stocks) confirmed breakdowns have shown little follow through.
Biotech has been weak for a year now and shows no signs of changing character. Looking at the chart of IBB, the (larger cap) biotech index, you can see it continues to stay below its downtrend resistance and currently sits precariously on an important level of support. The path of the last 6 months of its price movement has formed a bearish descending triangle and its breakdown seems eminent. Further weakness in the coming weeks opens the door for the possibility of a much bigger decline, a likely target is at down near last December’s lows.
Its rarely talked about but outperforming is as much about avoiding big losses as it is about picking and staying invested in the winners. With that in mind and at least for now, biotech is a place most investors should be avoiding.