The Market Vectors Biotech ETF (NYSEARCA:BBH) broke down from a double top and internal bearish ascending wedge (seen on the daily chart below) several weeks ago after completing a 3.618 per cent price extension of the 2005-2008 decline.
Medium-term bearish indications include the following:
-Overbought RSI turning down on weekly chart
-Ended last week clearly below the 55 daily exponential moving average (ema) for first time since at least November 2011, on higher volume (above prior three weeks)
- The daily 55ema has started to turn over -Breakout of bearish ascending wedge (although it is internal to the larger parallel ascending channel).
-Last week was the fourth consecutive week of declines (potential positive short-term, but bearish overall for the 14-month uptrend
Even though BBH closed at $50.89, the low for the week (actual low 50.84), it's in an area of confluence where several indicators point to potential support, which could lead to a bounce. The lower parallel trend line, the 21ema on the weekly chart (50.76), and the 38.2% Fibonacci retracement (50.74) of the rally from the early-March low, all converge near last week's low.
It's possible that the upward channel continues to progress higher in its current structure, in which case a rally from around the current support area would lead to a continuation of the uptrend into new highs. Given the above medium-term bearish analysis, this scenario is starting to look less likely. A more likely scenario, if the support in mentioned in the previous paragraph holds, looks to be a bounce into resistance and subsequent weakening with the BBH continuing to fall to the next significant support zone.
Alternatively, BBH continues to fall this week into the next support zone.
There looks to be significant support around the lower long-term trend line in a zone from approximately $47.48 to $46.22. A combination of four Fibonacci levels makes up that zone, along with the trend line and daily 200ema. (etf-portfolios.com)
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.