Trade idea #BTK long on a break of the 5450 level
Biotechnology belongs to the sectors of the stock market which were rather moderately affected by the Coronacrisis. In fact, in the second half of april the NYSE ARCA Biotechnology Index even managed to surpass its pre-corona levels to attack its previous high at about 5.420. However the advance of the preceding days was too strong to get beyond that level and in line with the total market the index got rejeceted at that resistance level.
Looking now at the weekly chart a multi-month range between 3850 and 5450 can be seen which followed a previous advance of the index. Trend trader would now expect the index to pass the upper boundary of that range but we have to patiently wait if that will happen or if the index will continue to trade within that range.
For a long breakout trade the following trading strategies are possible:
a/ set a buy stop order > 5.550 (upper boundary at 5.450 + 2% )
b/ go long on a daily close > 5.450
c/ go long on a weekly close > 5.450 (unless price gets too far away from the 5450 handle)
d/ after a successfull breakout wait for a consolidation back to the 5450 level to look for a Long entry
Which strategy you use depends of course on your trading style. Also a combination of the 4 strategies could make sense, i.e. 33% for a/, 17% for b/, 17% for c/ and 33% for d/.
Stop loss should be the last swing low. If the index won't take out last week's low this would be 4.950, otherwise the stop must be adjusted.
A first target for 50% of the position could be set at the round figure of 7.000.
I will update on the trade idea. See you.
Looking now at the weekly chart a multi-month range between 3850 and 5450 can be seen which followed a previous advance of the index. Trend trader would now expect the index to pass the upper boundary of that range but we have to patiently wait if that will happen or if the index will continue to trade within that range.
For a long breakout trade the following trading strategies are possible:
a/ set a buy stop order > 5.550 (upper boundary at 5.450 + 2% )
b/ go long on a daily close > 5.450
c/ go long on a weekly close > 5.450 (unless price gets too far away from the 5450 handle)
d/ after a successfull breakout wait for a consolidation back to the 5450 level to look for a Long entry
Which strategy you use depends of course on your trading style. Also a combination of the 4 strategies could make sense, i.e. 33% for a/, 17% for b/, 17% for c/ and 33% for d/.
Stop loss should be the last swing low. If the index won't take out last week's low this would be 4.950, otherwise the stop must be adjusted.
A first target for 50% of the position could be set at the round figure of 7.000.
I will update on the trade idea. See you.
Trade active:
All four entry signals have been met this week and Friday's large candle out of the 5400/5405 resistance zone could become a successfull retest of that zone. Stop remains at the initial stop below 4.989. If the index manages to create new high we can move the stop below 5.280.
Trade closed manually:
I close the trade idea at ~5.700 for a small gain.