With US stocks continuing to edge higher, there are a few
sectors where it appears that profit-taking may be accelerating.
And having recently looked at distribution in the transportation
sector, today's report reviews growing short-term weakness among
The fact that the
S&P Biotech SPDRS ETF
) has closed lower for two days in a row and is now oversold in
bull market territory
is the clearest sign that traders in the sector have begun to lock
in gains. XBI rallied to new, 52-week highs on Monday and after two
days of profit-taking have moved lower by more than 3%. More
importantly, the ETF is now trading at levels where, historically,
traders have tended to come off the sidelines as buyers rather than
Looking deeper, we can see key biotechnology stocks like
(NASDAQ: CLG) and
) all retreating from recent annual highs. Shares of Amgen were
down more than 1% on Wednesday, closing lower for four out of the
past five trading days. Celgene also closed lower on Wednesday,
finishing lower for three out of the most recent four sessions.
Down two in a row ahead of trading on Thursday, shares of Biogen
Idec, like those of AMGN, lost more than 1% on the day, as
But with the neutral ratings all three of these stocks have
earned so far - and positive edges of less than half a percent - it
is also true that AMGN, BIIB, CELG and other biotechnology stocks
may have further to fall. None of the three stocks, for example,
has pulled back into technically
territory, yet. And none of the stocks has sold off enough to
reach, for example, significant, new, short-term lows.
As such, traders looking for short-term weakness to buy may want
to keep these biotechnology stocks on their watchlists. Should
sellers become more aggressive here in the second half of the week,
there is a good chance that many of these stocks could earn
significant ratings upgrades by early next week.
Note also that XBI, which has finished in technically oversold
territory, has a positive edge of three quarters of a percent
heading into trading on Thursday.
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is Editor in Chief of TradingMarkets.com