tristan.rhodes
Short

IBB: Expect a steep drop again in the next day or two

NASDAQ:IBB   ISHARES NASDAQ BIOTECHNOLOGY INDEX FUND
21 0 1
IBB             has many interesting things going on that have me convinced it is about to drop quickly again.

The previous IBB             cycle involved a top at $400 with a steep drop to a bottom at $284. Soon after this bottom, the market gave 2 simultaneous BUY signals when RSI and Stoch RSI rose left oversold areas on the same day (see the purple circles with green vertical lines).

This was followed by a two-week uptrend (purple line). This uptrend ended shortly after IBB             had retraced 61.8% of the big drop, getting back up to $366. At this point, IBB             gave 4 SELL signals. The first signal was the 61.8% retracement. Second, the purple uptrend line was broken. Third, Stoch RSI left overbought levels. Fourth, RSI broke a rising trend line (purple).

This was followed by a very quick and steep drop down to 285. IBB             then gave two BUY signals when RSI and Stoch RSI left oversold levels. The next phase was similar to the first one, with a fairly steep retracement back to the 61.8% levels. That was the first SELL signal. The second SELL signal was the blue uptrend line has been broken.

With this evidence, I am willing to risk calling a short, even though RSI and Stoch RSI have not yet confirmed a SELL signal. I expect that a steep drop tomorrow will cause these SELL signals to be initiated. (See my empty purple circles where I expect them to occur.)

I have placed my stop loss right above the nearby high at 341.25.

I wish everyone the best with this trade!
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