IBB is the US biotech ETF that most people follow. The ETF was in a downtrend from early 2015 to early 2016. It consolidated for a while then broke out in late 2016. Since then, its been trending up. The trend channel has not been perfect – it has a slight sloping upper channel line. But the imperfect proportions of the channel are not enough to suggest a wedge is forming.
At this moment, the trend channel bottom is being tested. RSI and stochastics look to be in the early stages of hooking up. MACD- the longer momentum indicator- is still bearish.
Equityclock’s seasonal chart shown below suggests that the Biotech Industry seasonal tendency is for decent strength in November (which IBB has NOT displayed) then a big pop in December, followed by reasonable strength in January before the party ends some time in mid – late February.
If this ETF moves off of the lower channel line, and gets into the upper part of the channel by February per the seasonal chart, it could be a $35-$40 move. I’m projecting a purchase at $315 (this offers evidence of a successful trendline test and bounce) and a sell at the projected top of the trendline near $350. That’s about 11% upside. Not bad for a 2-3 month trade. Contingent upon the bottom trendline holding, of course.
Keith on BNN this Friday
Keith is on BNN MarketCall Tonight this Friday Dec 1st for the 5:30 PM show.
Keith appears regularly on BNN MarketCall to answer viewer questions on the technical analysis of stock trends, and to provide unique insights on the factors of technical analysis used in successful investment management.
If you have questions about the technical analysis of stock trends for individual stocks, be sure to phone in with your questions for Keith during the show.
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