On Friday there was a big breakout in a sector that is a good indicator of when the market is going to rally.
This sector has been consolidating right under its 200-day moving average for over a month. Now it’s on the move.
Which sector is set up for a big trade and more?
When the iShares NASDAQ Biotech ETF (IBB) is in a bullish mode it is a good indication that traders and investors are bullish on stocks in general.
As you can see in the chart below, on Friday the IBB broke out over its 200-day moving average and the $111.50 level that has held it back 3 times since November 2018.
Friday appears to be an impressive breakout, however, it would be prudent to wait for a further move over $112 to enter a trade.
If the breakout is good, then it should not trade back under $109. Therefore, this level should serve as a good stop.
Caution: The SPY has broken well above its 200-day moving average, but it has not cleared its November or December highs. Additionally, the QQQ has not cleared its 200-day moving average.
If these indexes pullback, it’s likely that the IBB will do the same. This is a reason to be cautious, but as long as IBB stays over $109 its in good shape, and as long as it stays over $106 it has potential for a big move higher.
If the breakout continues, expect the SPY and the QQQ to do the same.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation