Could bad biotechs be lurking in your portfolio?

At one time, the biotechs ruled as the market leader, impermeable to low oil prices. But those tides have changed, and Jim Cramer warns that those holdovers could be lurking in your portfolio, ready to cause immense damage.

On Monday the market experienced a dramatic change, when the biotech sector was badly beaten. The change mostly happened on the downfall of Gilead's Hepatitis C monopoly, thanks to Express Scripts selecting competitor AbbVie as its treatment supplier. As a result, Gilead has fallen to $88 from $108 in two days.

It is the umbrella effect of Gilead's beat down that really worries Cramer though. "The notion that the biotechs, as a group, may not have the pricing power we thought they did, and ruinous competition could be lurking around every corner."

To get the inside scoop on what the charts predict, Cramer spoke with Dan Fitzpatrick. He is a technician and president of StockMarketMentor.com and colleague at RealMoney.com.

So, how much lower can the biotechs go? And when will they once again be safe to own?

The group can be measured by looking at the iShares Nasdaq Biotech ETF, IBB. The ETF has fallen 7 percent in two days, but is still up 29 percent year to date.

Fitzpatrick thinks IBB is at a crucial level currently, and what happens in the next few days will predict if the group ends up on the naughty or nice list.

If the biotech ETF holds above its 50-day moving average at $294 for several sessions, Fitzpatrick thinks that IBB can safely be bought. This indicates that what is happening is a short-term pullback.

However if it continues to fall, then biotechs will be nothing but a pain train until it hits a safety net at $261.

So for now, Fitzpatrick isn't seeing in the charts that the biotechs are about to give up ruling the market.

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"Today's selloff was a shot across the bow for the group, and if the biotech ETF breaks down below $294 and goes any lower, then Fitzpatrick thinks we could have another nasty leg down," added Cramer.

So will the biotechs rebound? If IBB can't stay above the 200-day moving average at $261, then the uptrend could be at the end.

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