The back story: I have never traded the iShares Nasdaq Biotechnology ETF, but I monitor it as a gauge on when to get into or out of individual names. That said, some traders prefer to play the ETF rather than a few of the underlying stocks themselves.
Why others are buying today: Senate Republicans unveil the details of their plan to repeal ObamaCare today, and the IBB has run up big-time in anticipation, gaining about 13 percent over the last three days. Investors are betting that President Trump won’t fail in his second attempt at a health-care bill, so they are buying that rumor, hoping to sell higher on the news.
Why I’m not: While I am long-term positive about the sector and IBB, I expect a short-term pullback to support, which would put IBB in the $295 to $300 range. I took profits on the upswing this week, selling four of the six biotech stocks I held when the rally started.
My next move: I’m waiting to see when I can buy back into biotech on the dip. Again, for me it will be using individual stocks, but when the IBB pulls back to about $300, I’ll get interested in the sector again. Alternatively, I could be convinced to reconsider the sector if we see a period of sideways consolidation that shows support and proves that there is new money flowing in to match the profit-takers out there.
Kyle Dennis runs Kyle Dennis’ Biotech Breakouts (biotechbreakouts.com). He is an event-based trader, who prefers low-priced and small-cap biotech stocks. At the time this article was published on RagingBull.com, he had he had no open positions, options or orders in IBB and had never traded the ETF. As noted in the article, he uses IBB as a sentiment indicator for biotech stocks.
You may also like
Exclusive System Tracks Wall St. Insiders
“Dollar Ace Simply Exposes Information That Wall Street Wants To Keep Quiet” Said Kyle Dennis
“One member, Wesley M., has already reported 360%+ gains in just a few short days. Don’t miss this!”
(Reserve Access Now)
“What Recession?!” Jason Bond nets $55,060 in realized profit in One Day
After going 6 for 6 on profitable trades recently, we caught up with Jason to ask how he did it.
Check out Jason’s exclusive interview revealing this tightly guarded strategy. (Watch Now)
RagingBull.com Co-Founder, Jeff Bishop, Launches High Conviction Trade Service
“We listen to our clients and we give them EXACTLY what they want, so we designed a service to deliver 1 trade, 1 time a week, with a 100%+ PROFIT TARGET, directly to your inbox every Monday before the market opens. (Read More)