They Said It Couldn’t Be Done
Historians documenting the greatest human
accomplishments during the past 100 years will no doubt mention the Golden Gate
Bridge, Mount Rushmore, and the Empire State Building. After witnessing
what’s happened over the past couple of weeks, it wouldn’t surprise me if the
comeback in biotech stocks in the year 2000 would appear somewhere on the list
as well.
Not only is the climb back to highs in this chart of the Biotechnology Index
(
BTK |
Quote |
Chart |
News |
PowerRating) an amazing sight, there is also some educational value to be derived
as well.
The BTK came off its April lows in tentative fashion, keeping
bullish sentiment in check. But those who watched individual stocks within the
index saw constructive signs early on that would have long-lasting implications.
During the course of May and June, there were quite a few biotech stocks breaking
out from their bases on good volume. These breakouts were also preceded by
accumulation patterns during the formation of the bases.Â
Now–turning to the BTK Index itself, you can see an interesting
structure right in the middle of the July/August 2000 range in which price
action ricocheted quite neatly between the 61.8% and 38.2% Fib off the previous
big downswing in July. From the 38.2% retracement we saw the BTK catapult from
that Fib trading range back to the the July highs. Then there’s a brief handle
followed by the breakout you saw yesterday.
Now that we’re knocking on the door of the old March highs, it’s
easier than ever to imagine a breakout to new highs. But, as always, we’ll watch
what it does rather that trying to make a prediction.
Have safe and enjoyable holiday weekend,
Eddie
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