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IBB (NASDAQ Biotechnology ETF): Bullish Watch List

IBB has suffered a serious selloff. I don't know if a major top is in place although the weekly MACD bearish cross does not inspire much bullish confidence but as long as the Janury low at 222 is not breached (Monthly lower low if below 222) I will give the benefit of a reasonable doubt.

My objective is to take advantage of a potential oversold rally.

So far even if it is still early in the week we have an inside candlestick following a large black candlestick that could be suggesting selling exhaustion.

If next Friday the weekly Harami candlestick is confirmed the initial target for an "oversold" bounce is located in the range 240 (20 wma) - 246 (Breakdown area = Logical Resistance).

IBB Weekly Chart
Larger Image

Next in the daily chart below we can see that the last three candlesticks are suggesting that probably last Thursday price has established a tradable bottom (Doji; Black large candlestick unable to establish a lower low; Harami).

A "tradable" bottom will be confirmed once a higher high, above 239, is achieved. If this were the case a potential target for a multi-day/week rebound would be located in the range 246-253.

If the RSI (5) breaches its trend line resistance it should strengthen the short-term bullish case.

IBB Daily Chart
Larger Image

Next and probably the most appealing reasons can be seen in the 30 min chart:

  • We have a potential Double Bottom with a theoretical target at 248 (It looks like this number is important!!!)

  • From last Friday's lod we have a potential impulsive up leg (If the wedge is confirmed today).

IBB 30-Minute Chart
Larger Image

Elliott Wave wise when an up leg off a potential bottom unfolds an impulsive sequence more often than not price will unfold at least one more up leg. If this is the case the probability of the Double Bottom will substantially increase. I expect a nice short squeeze should propel price higher once / if the neckline of the DB is breached.

Therefore in order to have a well-grounded setup we need a higher low in the following pullback (It could coincide with the assumed SPX wave (E) of the Triangle option).

The idea is to go long during the pullback with a stop below last Friday's lod (Keep in mind that this setup is aggressive hence the stop must be respected)

 

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