Yesterday a tidal wave swept the market. A sea of red dominated.
The S&P 500 was down over 2%. The Nasdaq was down close to 3%, and the DOW was negative 1.63%. Across the board, the market experienced overwhelming supply.
With the market and various sectors trading below critical short-term support and trends, what are the following key levels of support to look out for? And might this broad selloff present an opportunity to buy the dip?
The above map, from Finviz, clearly shows you the extent of selling experienced yesterday and its effect on specific stocks and sectors.
A day to forget for the bulls!
The Biotech sector was one of the hardest-hit yesterday. The ETF was down 3.21%.
After failing to hold critical support at $170, the ETF has now experienced two serious down days, together with the overall market.
The sector remains up 7.02% year to date and 20.56% over a year. However, after the most recent selloff, the ETF is now negative on the quarter, down 0.90%.
Bulls will hope that the next critical level of support holds firm. $160 has previously acted as support and is now also the 200d moving average. This level now becomes the all-important level of focus as we advance.
If the sector can find support in this area, one might expect leading biotech names to catch a bid.
On that note, let’s look at some of the highest weighted stocks in the IBB and identify critical support and potential bounce opportunities.
MRNA was not able to avoid the recent selloff. This week, MRNA is actually down more than twice as much as the Biotech sector.
MRNA, as of yesterday, is down 11.48% on the week. However, the stock is still up 267% year to date, 63.87% on the quarter, and slightly green on the month.
So, one might argue that this is a healthy pullback for MRNA.
An opportunity might exist to get long MRNA if the overall sector and market finds support.
I see two potential scenarios.
If MRNA can firm up above the previous low of $366 and display relative strength to the sector, it might set up a relief bounce trade.
Below the previous low of $366, support is $350. If the stock travels towards $350 and finds support, that might signal that the stock has bottomed out in the short term. This could present a good opportunity for a bounce trade.
This stock has traded fairly closely with MRNA, as both stocks are involved in producing vaccines for COVID-19.
BNTX has, similar to MRNA, experienced a significant selloff. The stock was down almost 10% yesterday.
Support from the uptrend, on a higher time frame, can be found in the $260s. Near this level is where bulls want to see the stock catch a bid and bounce.
If that happens, along with sector strength, it might create a good bounce trade opportunity.
Alternatively, if the stock continues to sell off, all eyes will be on $250 and $220 – $200, as the following key levels of support where the stock might bottom.
AMGN holds a 7.73% weighting in the IBB, making it the second largest. AMGN has consistently displayed relative weakness to the biotech sector and overall industry.
If the biotech industry continues to sell off, this might continue to experience rapid momentum to the downside.
AMGN has been trading in a clear downtrend since breaking below $240 and has, on numerous occasions, presented a substantial risk: reward opportunity for the bears.
The 52w low on AMGN is $210.28, which is now a massive level of interest as the stock is very quickly approaching it.
If weakness continues in the sector, then the momentum to the downside in AMGN could continue to provide excellent opportunities for the bears.