Net ETFs Lower, Biotech Top?
The Net-focused traded funds ended the
year as they led it, leading the exchange-traded funds to the downside on
Friday. The Biotech HOLDR, the one tech ETF that has resisted the tech downtrend of late, faces a topping movement in its sector.Â
The Internet Architecture HOLDR
(
IAH |
Quote |
Chart |
News |
PowerRating)
fell 9.4%, the day’s sharpest loss among the exchange-traded
funds.Â
Among its components, BEA Systems
(
BEAS |
Quote |
Chart |
News |
PowerRating)
lost 11.4%, Akamai Technologies
(
AKAM |
Quote |
Chart |
News |
PowerRating) 11.8%, Inktomi
(
INKT |
Quote |
Chart |
News |
PowerRating) 10.9%,
Verisign
(
VRSN |
Quote |
Chart |
News |
PowerRating) 6.8%, BroadVision
(
BVSN |
Quote |
Chart |
News |
PowerRating) 8.7%.
The B2B Internet HOLDR
(
BHH |
Quote |
Chart |
News |
PowerRating) fell
7.4%, the Dow Jones Internet iShares
(
IYV |
Quote |
Chart |
News |
PowerRating) 6.8%, the Internet HOLDR
(
HHH |
Quote |
Chart |
News |
PowerRating)
4.9%, the Nasdaq 100 Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating) 4.7%, the Semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating)
4.4%, the Dow Jones Technology iShares
(
IYW |
Quote |
Chart |
News |
PowerRating) 4.4%, the Internet Architecture
HOLDR
(
IAH |
Quote |
Chart |
News |
PowerRating) 3.8%, the Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating) 3.3%, the Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating)
1.4%.
Since July, the Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating)
has ran into headwinds relative to the general market. In the following chart,
note the sideways action of the biotech basket’s relative strength line over the
past six months while share price has started to give ground over the past four
months, as evidenced by a downward sloping trendline (see black line across
the price highs).
Â
Institutional advisor Bryan
Brown, principal of Spectrum Equity Services, called my attention to this possible top. Bryan sees more downside
ahead of the sector. Since October, he has advised clients to sell biotech rallies and underweight the sector, which he views has having formed a cyclical top. To Bryan’s eye, the Amex Biotech
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) is completing a
head-and-shoulders
top, which stands out best when viewed on a weekly chart. I’ve also
added an RS line in the following chart.
The top field of all charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In the second field, a
blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
If you’re new to exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.Â
You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.