The Biotech Base is finally complete and we’re looking for higher prices. Check out this video of IBB, LABU and XBI. (September 07, 2016).
In this Chart video I want to look at biotech. There’s a lot a attention put on FANG these days, on Facebook ( NASDAQ:FB ), Amazon ( NASDAQ:AMZN ), Netflix ( NASDAQ:NFLX ), and Google ( NASDAQ:GOOGL ). Lets look at IBB here, and also, triple your fun on this, LABU ( NYSEARCA:LABU ), which actually tracks the XBI ( NYSEARCA:XBI ) as opposed to the IBB. For whatever reason I just always go to the IBB. They are all kind of the same except LABU ( NYSEARCA:LABU ) is triple. Here’s what I’m talking about though: This has been in a base, basically (pardon the pun) for all of 2016 until recently, where we got a breakout above this 200-day moving average and now a test OF the 200-day moving average, right about the time that the 50-day moving average starts ticking up and is crossing over it. So we’ve got a bullish crossover on these moving averages, which are, by the way by definition, are lagging indicators. They are not really trade signals, they are confirmation signals, there is a difference.
I think you can be long biotech right now, as long as you have a stop right down there. It’s a fairly tight stop, 4, 4.5 percent is all you are risking and you don’t have to risk more than that for the pure and simple reason that if the stock falls below this level you don’t want to be long anyway. Because the only reason you are buying it is because of the breakout above the 200-day moving average, the test. And then your thesis that if the stock is truly being bought it’s going to go higher. So you can keep a stop right here. You don’t have to look and say, “Oh, it could fall clear back to support here. That’s too big of risk to take.” Well shoot man, don’t hold the stock for that long. If you are going to do THAT please let me know every time you trade and I will take the other side of that trade. You don’t want to be holding these things for that long. You want to be careful. And here again, if the stock starts trading BELOW this last little level of support here, if it starts trading here you don’t want to be long this stock.
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