Bullish price action out of Airlines, Biotech & Machinery
Key Takeaways
- Tuesday’s minor range-breakout is a positive for SPX and DJIA while NASDAQ has some catching up to do 2021 lows expected the last two weeks before a bottom
- A number of various sub-sectors look to be trying to bottom out and push higher, namely Biotechnology, Airlines and also Machinery within Industrials
- Polygon looks attractive within the Crypto- space as its technical surge happened after an important cash infusion of $450mm by Sequoia Capital India and Tiger Global
“Turnaround Tuesday” became more like “Turn Higher Tuesday” as both SPX and DJIA broke out of near-term multi-day ranges to push higher. Breadth was encouraging and five main S&P Sectors out of 11 rose more than 1% on the day. Overall, higher prices look likely to 4620 or above to 4650 in the days to come, and it looks right to stay long, using dips as chances to average into technical longs. Wave structure seems to suggest an ongoing upward sloping pattern which should exceed last week’s highs before any real resistance. Bottom line, trends remain short-term positive and higher prices look likely into mid-month.
Various Sub-sectors look to be trying to bottom out
Healthcare’s perennial “whipping boy” in the last year, Biotechnology, looks to be potentially bottoming out at nearly an exact one-year anniversary of where this group peaked out in February 2021.
Similar type price action is also being seen in quite a few other sectors in recent days, namely Airlines and also various other parts of Industrials, such as Machinery names. This is bullish for outperformance into late February/March for these groups and it looks right to overweight these areas.
Specifically with regards to Biotechnology, it looks to be still quite early to call for any structural breakout, yet the pattern increasingly is taking the shape of a possible Reverse Head and Shoulders pattern. As many technically informed investors are aware, awaiting the actual breakout of the “neckline that connects former peaks for Reverse Head and shoulders patterns is essential to confirm this pattern.
Bottom line, charts of Biotechnology seen by XBI, the SPDR Series Trust S&P Biotech ETF, look to have formed a higher low than January and should push higher to test and exceed early February peaks at $95.60. this would serve as official confirmation, allowing for an above average bounce to $107 initially. Stocks to favor in this group technically include VRTX0.20% , REGN0.32% , and AMGN2.35% from a trend following perspective. BIIB2.03% also looks attractive from a counter-trend perspective given its successful bottoming out at a level of multi-year support.
Machinery looks to be yet another area of focus within sub-sectors, and stocks like Deere (DE-0.07% ) have just broken out of its nine-month base.
This breakout follows a lengthy sideways consolidation for DE near its all-time highs, so the breakout to new weekly highs is constructive towards thinking this should push up to $415-425 technically.
Finally, within the Crypto-currency space, Polygon has generated lots of interest to fundamental and technical investors alike after the media reported a huge $450 million investment by a group including Tiger Global and Sequoia Limited India.
Technically speaking, MATICUSD (Polygon) looks attractive given Monday’s push back up above key trading resistance at $1.90 on the news of this cash infusion. This represents a structural improvement, suggesting the entire pullback from December should be complete from an Elliott perspective as a three—wave decline. Momentum is positively sloped in the short run and not overbought. Thus, a rally back to new all-time highs is likely in the weeks/months to come. Resistance initially should appear near $2.30, then at all—time highs near $2.91. Moreover, the ability to surpass $2.91 opens the door for rallies up to $3.59 technically. Pullbacks down to $1.75-$1.85, while not immediately expected, would represent an even better technical buying opportunity, as I expect rallies into late February back to near all-time highs
