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Breaking Bio: Drug Makers Cooking Off March Lows (Video)

May 06, 2020 5:14 PM ETAbbVie Inc. (ABBV), GILDALNY, ALXN, AMGN, BIIB, BMRN, REGN, VRTX, XBI, MRNA4 Comments


  • XBI soared nearly 58% off its March low.
  • Amgen climbed 38% off March low almost back to an ATH.
  • AbbVie also up ~37%, but a long way from the highs hit in 2018.
  • In the video, we discuss larger context for these moves and probable patterns going forward for the largest components of XBI.
  • Looking for more stock ideas like this one? Get them exclusively at Stock Waves. Get started today »

Many of the companies included in this article are in the mix developing treatments for COVID-19, some already have possible therapies in place. But perhaps the thing they have in common the most is how their price charts are governed largely by investor sentiment. Most of these names sold off right along with the market into March lows, but the rebounds for some have been far more impressive. In the following video, Garrett & I look at the popular SPDR S&P Biotech ETF (XBI) along with the components beginning with the largest market caps*. Our goal as always is to get a better understanding of the sector viz sentiment from the sum of its parts.

XBI has, basically, gone from Chemistry teacher to Kingpin in no time, hurtling 58.5% off the March 18th low (a few sessions ahead of the S&P) into the April 28th high like a pizza onto the roof. Whether counted as a larger degree fourth or an Intermediate degree (2) in a move off the 2016 low, XBI has a very clear "flat" corrective pattern from the July 2018 high into the March low.

Since the initial move off March was clearly only a 3-wave "abc" move that makes a Leading Diagonal the most likely option for a bullish pattern. It is nearing the typical resistance region for the 3rd wave and should hold support in the 80s as a 4th. The fourth wave of a diagonal can come deeper than that of an impulsive move, but with the 200-day MA around 86, that region would be ideal. A fifth wave should then target the 105-110 region to complete the first wave at the start of a longer-term rally. Support for the larger wave-2 retrace would be back again to the 80s.

From that larger wave-2

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