The new year has seen stocks get off to strong start, but the rally is still a bounce in a bearish trend.
As I stated in one of my posts last week, it’s a good time to be defensive. However, if the market pulls back, here’s an ETF that could set up nicely for a buy on the dip.
The iShares Biotechnology ETF, IBB, has been one the stronger sector movers this year, and that’s a good starting point for finding a winning trend trade for 2019.
More importantly, it has traded well above its 50-day moving average, and this moving average line has also begun to slope up. This is bullish.
The average is about $102.50, and there are prior daily lows from October and November at the $101 level which represent good support. In fact, the $101 price area has been a pivotal area for IBB since 2016.
Now that IBB is back over $101 it should stay above it.
The trade here is to look for an opportunity to buy a retracement to the 50-day moving average with a stop under $100. I’d have my stop under $99.50 to make sure the $101-$100 level has really broken.
IMPORTANT. If IBB and/or the market sells off, be very careful not to enter IBB during a steep decline. Look for IBB to demonstrate that it is bouncing off of the 50-day average or the $101 price level before entering a trade.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation