Playing a Potential Bounce in XBI

Currently the XBI (S&P biotech ETF) is down 9 days in a row, sporting a RSI-2 of .28, 6 out the last 7 days the ETF has closed below the lower bollinger band, 0% of the stocks within the ETF are above their 10 day moving average, and only 3 out 16 (18%) are above their 50 day moving average.  It’s safe to say that XBI is oversold.  Being that ETF’s are mean reverting vehicles the XBI has a good shot of bouncing in the short term.  Going back to 2006 there has been 7 occurrences when the XBI has been down 6 or more consecutive days, if you bought the close on the 6th day, 5 of those trades would’ve been winners and 2 losers, the total gain on the winning trades; $11.93, losing trades; $7.67, and that’s with absolutely no risk management.

Below you can see each instant where the XBI was down 6 or more days in a row, with some prudent money management the outcomes would’ve improved dramatically;


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.


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