Four Shorts On IBB’s Trail

It’s becoming increasingly difficult to ignore the action in biotech and healthcare, particularly this past Friday when so many leading stocks in these sectors were hit for losses along with the volume to back up the moves. Notables include Alexion (ALXN), Biogen (BIIB), BioMarin (BMRN), Celgene (CELG) and Regeneron (REGN) to name a few, not to mention the iShares Biotech Sector ETF (IBB) itself.

iShares Biotech ETF (IBB) Daily Chart - March 21, 2013

iShares Biotech ETF (IBB) Daily Chart – March 21, 2013

It’s even more difficult to consider shorting these stocks in a bull market, but if you were so inclined to test the waters in that direction, here are a few additional large cap stock ideas worth evaluating. None have earnings expected to be reported until at least late April.

AmerisourceBergen (ABC) Daily Chart - March 21, 2014

AmerisourceBergen (ABC) Daily Chart – March 21, 2014

AmerisourceBergen (ABC) – Weekly uptrend from September 2012 has been broken since January. Recent bounces fell short of testing the 71 highs, and Friday’s -2.5% decline was accompanied with nearly 2X average volume. Short setup with a break under 64. IBD rating 65.

Ilumina (ILMN) Daily Chart - March 21, 2014

Ilumina (ILMN) Daily Chart – March 21, 2014

Ilumina (ILMN) – I’ve been watching this one since last week and regretting not trying a short on it sooner, and now I think many eyes are on it as it’s faltering at the top of a virtual parabolic run on the weekly chart. The recent short-term uptrend is clearly broken, and Friday’s -5.42% slide dropped it below the 50 SMA on 2X average volume. A short here could be with a stop on a close above the upper trendline, presently near 160. From Friday’s close, a stop over 160 risks just under 5%. IBD 98 rating.

Incyte (INCY) Daily Chart - March 21, 2014

Incyte (INCY) Daily Chart – March 21, 2014

Incyte (INCY) – This stock has had a magnificent run from July of last year and is probably my least favorite selection to short on this list since it may currently only be in a sideways range as opposed to rolling over. Still, Friday’s -6.88% slam firmly under the 50 SMA on over 3X average volume makes it worth consideration, and INCY has the poorest fundamentals of this bunch. If you pay attention to gaps, there is one to close at 56.26 from January 9th. A short here could be tried with a stop above the 50 SMA at 64.14, however the risk / reward is a little on the steep end at 8%. IBD 52 rating.

Shire (SHPG) Daily Chart - March 21, 2014

Shire (SHPG) Daily Chart – March 21, 2014

Shire (SHPG) – Shire’s recent selling on higher than average volume has invalidated uptrends on both daily and weekly charts, and now has spent two days under the 50 SMA. A short from Friday’s 149.99 close with a stop above the upper trendline, or the nearby 50 SMA at 155.80, risks about 4%. IBD 96 rating.

Was this biotech sector selling an anomaly of quadruple witching antics? Maybe to some degree, but these stocks were acting poorly before then and are now exhibiting stronger signs of a rotation out of the sector. It’s hard to say “wait for confirmation” when we might be looking at the start of it right now.

Good luck trading!

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