We’ve been bullish on this group for as long as we can remember going back a full four months to this post.
We’ve talked recently about the possibility for the group to remain a sustainable out-performer here.
As of late that’s not been the case with the S&P500 bio-tech index down ~850 bps in recent weeks as the SPX itself has declined only ~450 bps.
That said, much of this is pure give back of material out-performance for bio-techs in recent months as the group had rallied 20% since our original post on 7/16 vs. a 825 bps rally in the market.
As we look at the group now, we can see that its recent decline has taken it to a combination of trend-line support (1) and (2).
We would imagine this support could produce a bounce in the index in the near-term. Should support give way, we suggest stepping away from the group and re-allocating capital to other ideas, thereby locking in the gains from our original post back in July.
Such a break would imply this index falls below ~1490.