The biotech sector has been about as close to bulletproof as Superman. This daily chart of iShares Nasdaq Biotechnology ETF (IBB) shows another test of $370. Note that the earliest test in March was a "gap and crap" that has not been retested. Since that move, the IBB has been channeling between $335 and $370.
But look at the volume characteristics of this chart. The last two advances have occurred on declining volume, which is different than the March rally, which was accompanied by increasing volume.
So I'm not trusting this relative strength in biotech and see $370 as very formidable resistance that must be broken through: (1) on higher volume, and (2) sustains the $370+ price for a couple of days. And if you do happen to buy the breakout, be sure to place a stop back in the channel. The only way that stop will be hit is if you were wrong to buy.
Personally, I'm not buying this, but I am watching it as a reflection of individual stocks in the sector, such as:
Illumina (ILMN): Breaking to new highs that are testing the January "gap and crap" (we've seen several of those wonderful bull traps).
Mylan (MYL): At a pretty good buy point after a multiweek consolidation. But still quite a ways above the 200-day moving average, so my expectations are tempered (see my earlier post about "who is behind me").
Gilead (GILD): Consolidating within what looks like a clean breakout from a long period of consolidation and a "touch and go" move to the 200-day moving average.
Vertex Pharma (VRTX): Still consolidating and not particularly actionable right now. But a strong biotech index makes me feel better about the prospects of a breakout here.
Celgene (CELG): Lagging ... but starting to look like Gilead used to look.
Biomarin Pharma (BMRN): Testing the March high of $130.
These are just some of the names I'm watching. The one thing they have in common is their relationship to the 50-day moving average -- either above it, or coincident with it. And that means the stocks (and the index) are still attractive to investors.