Biotech ETF is a very easy short.

Anyone looking for about as sure a thing as you can get should look no further than shorting IBB the International Biotech ETF.  Below is the monthly chart.  There are few sectors that are as speculative as biotech in the first place so that exponential rise is all leveraged speculation.  It looks ripe for lower prices going forward.  Look at that declining double top.  Not good folks, not good at all.

Of course "soon" is not a model. Below is the zoom in showing the model detail.  It is difficult to know whether the leftmost peak is really 3 or 5.  For now I am treating it as 5 because the action down into April did not look like it was corrective.  It looked like 5 waves down.  Also, the early triangle in the subsequent bounce that happened late April through mid May did not look impulsive.  Couple that with the fact that I think the broader markets have peaked along with the observation that the marginal players (i.e. speculative players) are hit the first and the worst and it suggests that biotech (highly speculative) has already begun its bear market.

The wave 1 down happened while broader markets were rallying.  Then biotech caught a wave 2 bid but to a lower high.  While the die seems to have been cast months ago, Yellen's recent comments which singled out biotech as being overvalued (which was the bone she hoped to throw to the shorts with the implication that the broader markets are still not that overvalued...) has to be taken as a sell signal by the market.  At the very least it has to be taken that any support which the fed is offering to prop up the markets (i.e. buy stocks with taxpayer money) will not be extended to the biotech sector).  Thus, it should now be open season on biotech.

Beware the short term potential for a bounce consisting of 5 small waves up shown at "or 2" which is my alternate count.  I only wonder about this because there looks to be an early triangle in the current wave which means that it could be an a-b-c move.  If that happens just cover shorts above $260 and wait for the 5 waves to play out before re-entering twice as hard, especially if such rally cannot produce a higher high than Feb.  If it can go a bit higher then this means we are really just finishing up wave 5 up and the biotech collapse will begin as soon as those 5 waves are complete.  But again, with Yellen talking the sector down in an unusual but official testimony, I just don't see it as the high odds play that the market will take it back up there.  Any fund manager who loses money in biotech after the supposedly omnipotent fed chief says the sector is "stretched" should be fired on the spot.

As always, a good strategy is to build a position short over a couple of weeks thus ensuring you catch some of the honey if a gap down happens while not going all in too early if one last short squeeze play is attempted.

I like the Jan 2016 $110 puts at $1 if you can get them that cheaply.  Again, don't go all immediately if you want some margin of safety here.  Buy 1/3 or 1/2 now and then let's see what the chart does in 2 weeks to determine whether to average up or average down.  Also, if the chart cannot make a lower low than April, be aware that this could be a 4th wave playing out and that could eat option valuations up.  The true low risk low leverage way to play this is just a straight shorting of the shares. 

Strike	Symbol	Last	Chg	Bid	Ask	Vol	Open Int
110.00	IBB160115P00110000	1.20	0.05	0.65	1.20	2	132