This ETF Could Rally During A Trade War
Yesterday, escalating trade tensions with China created a more dangerous environment for stocks, but the market selloff also highlighted some bright spots.
It’s time to be very cautious, and it’s a good time to identify the next big opportunities.
Today’s trade idea is in a sector that has the potential to rally in the face of trade of a trade war.
Click here to get the details on a trend that closed higher despite yesterday’s market decline, and looks like it has big potential.
As you can see in the chart of the Biotech Sector ETF (IBB) below, yesterday, it was strong intra-day, and despite being pulled back down, it closed higher.
This relative strength is bullish.
However, Friday in August is generally not the best time to initiate trades, and given the market’s weak position, I’d wait until Monday to consider new positions.
The way to look at IBB is also to be patient.
The trade idea is to be bullish if it closes over $107. Until then it’s basing and still at risk of selling off.
Its relative strength over the last several days suggests that it is getting ready to move higher. When that is confirmed with a close over $107 then it’s time to buy.
Once IBB closes over $107 it should not trade back under the support of the 50-day moving average and the $105.50 level.
Therefore, the stop should be under $105.50.
This is a very tight stop because of the fragile condition of the general market.
If the market consolidates, new trends in stocks and sectors like IBB can emerge, but if the market declines significantly it’s prudent to take small losses and wait for new opportunities.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation