IBB Biotech ETF Weekly Chart; Rising Wedge; Negative Divergence Spankdown; Upper Band Violation; Price Extended

Here's an update with the IBB weekly chart. Keystone posted it about one month ago and since the MACD line was still long and strong, one more price high was coming on the weekly basis, and that would likely be the top, as the MACD goes neggie d, joining the other indicators. The projection was for a top in a couple weeks, which occurs, and the IBB receives the neggie d spankdown over the last couple weeks. It was easy peasy.

The overbot stochastics, and RSI and money flow from earlier in the year, were agreeable to a pullback. The rising wedge pattern is ominous since the collapses from rising wedges can be quite dramatic. So far, the drop is sharp but let's see how far down she falls. The top with the white buy candlestick three weeks ago comes with negative divergence across all indicators except for the MACD. Then, 2 weeks ago, you see the spike high in price by the top shadow on that red candlestick. So price prints a matching or higher high so the indicators can be assessed and you can see the MACD goes neggie d. You knew instantly that IBB has just topped on a weekly basis, and, down she goes.

IBB violated the upper standard deviation band so the middle band, which is also the 20 MA, at 127.34, and rising, is in play as well as the lower band at 103 and rising. Price is extended above its moving average ribbon so a mean reversion lower is needed. A tap of the 20-week MA at 127.34, and rising, is probably in the cards. At that time, price may bounce as anxious dip-buyers and vaccine news follower's buy support.

To gauge further downside or not, watch the RSI. Biotech bears need the RSI below 50% in bear territory before they can smile. Bears also need a negative MACD cross (black line down through red line). Another sign of more downside ahead is the stochastics moving into bear territory below 50%. Those metrics can tell you the extent of the downside.

A top on the weekly basis is a substantive development. Keep in mind, there is no reason for price to come back up for a higher high since the chart went into negative divergence. There is no more upside fuel. Perhaps some vaccine hype may goose it higher but technical-wise, the chart is bearish and projecting a multi-week pullback. Furhter, which is actually surprising, the IBB monthly chart is at a higher high but all indicators are negatively diverged. After the weekly pullback plays out, price may become buoyant again but will not necessarily make another higher high on the monthly basis. In other words, as odd as it may sound, IBB may have printed its long term top that will not be seen for many months or a year or few. You would think the vaccine hype, and when one is approved, would carry biotechs to the moon, but by the looks of the charts and negative divergence in play, the biotechs already took the trip to the moon.

Use the weekly chart example above for assessing other stocks such as the FAANG names, chip stocks, etc..., and you will see many beginning to top out on the weekly basis. This may be the reason that the top is taking a little bit of time to appear for the stock market. Rather than a brief move down in the stock market, say 3 weeks ago, then rally higher to honor the weekly chart that still had some upside juice, to print the top, the stock market has remained buoyant until the weekly chart's set up with universal neggie d which is now and over the coming days and couple weeks or so.

Keystone is not in IBB currently long or short. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.