What do you and Eoin think of biotech right now?  I have made a lot of money recently on these stocks, which I bought with the intention to buy and hold. However the very strong rise of e.g. FBT (which my fund follows) has made me wonder whether I ought to be getting out. Yet the chart looks rivetingly consistent, and it totally ignored the recent correction in the S&P.  Difficult to put a trailing stop on, as there are quite often large fluctuations.  

Riveting times!  I have also been making quite a lot of money on EURUSD, like everyone else. The charts just look as if they are not caused by speculation but by large scale capital movements, as one currency trader put it, so I feel confident staying in and actually increased my position yesterday even though it had been accelerating downwards. But I wonder what could make this trade turn round eventually? Eoin today mentioned that if Greece left the euro, the euro would rise. But this is a long way off. The ECB will not intervene. But will the FED perhaps do so at some point?  Have the traders got enough muscle to cause a spontaneous short-covering rally at some point?

David Fuller's view

Many congratulations on these positions – you obviously know what you are doing.

A key point, I suggest, is to go on making your own decisions, as calmly and realistically as possible, rather than allowing yourself to be influenced by someone who says what you emotions would like to hear.  

The charts are extremely helpful in this environment, and while I do not doubt for a second that biotechnology has a terrific long-term future, what we see on this weekly chart of FBT is a steepening momentum move which is now more overextended than its predecessor in February 2014.  So another big pullback may not be that far off.  The tails have been very useful on this weekly chart.  Note the big move to 88 which was largely retraced as the week progressed, leaving a large tail.  A smaller version also occurred the following week.  These signalled that demand was temporarily exhausted and that a mean reversion correction was commencing. 

You may not get a similar signal this time but you already know that mean reversion is certain to occur an quite possibly in the near term.  You have lots of choices.  You could ride out the next mean reversion as a long-term investor but do not be surprised if it comes back to 100.  You could anticipate this by lightening your position on further strength, ahead of the eventual downward dynamic which will send other nervous holders scuttling to the exit door.  You know the adage: ‘If you are going to panic, panic early.’  I could go on but you get the point.  Select the strategy that you feel most comfortable with. 

Re EURUSD, I am not sure what the difference is between ‘speculation and large scale capital movements’, other than the latter sounds more reassuring.  You have asked all the relevant questions.  You can also see that this is becoming a short-term overextension.  Moreover, plenty of people will be wondering if they should be covering this side of the psychological, roundophobia parity level.  This is fast approaching another bounce but we also know that the Euro was a lot lower fifteen years ago.