When Sunny Gets Blue

What a difference a year makes. 

Last December 2014, we took a bullish view of the mid-cap biotechnology firm Bluebird, a fairly new issue at the time. The chart had set-up technically and looked ripe for breakout higher. While the velocity of the move higher certainly was a surprise, the bullish action was not. 

However, the steepness of the uptrend into the summer months eventually was too much to sustain, leading to a loss in momentum and the latecomer, hot money traders effectively trapping themselves into the name. 

Since then, BLUE has been the poster child for much of the biotech sector, a former momentum leader giving plenty of false hope for a bottom in recent months. This morning, biotech continues to lag the market, with the IBB ETF back below the key $330 level and the XBI (small/mid-cap ETF) back under $69. 

BLUE has a major gap down at $49.83 from December 8th, 2014. It is likely correct to resist any long attempts until that gap gets filled, if at all. 

On the other side of the tape, the GMCR buyout illustrates why we are careful with short ideas inside Market Chess Subscription Services, focusing mostly on large cap, liquid, not-heavily-shorted, and non- likely-buyout names as actionable short ideas. Typically, it is best to wait for an established bear market on the major indices before shorting with more aggression.