Today, the Biotech HOLDRS (BBH) traded the 136 level and that has the point and figure chart back in a column of X's and should now have support firming up at the 128-130 levels. In the past month, PremierMarkets.com profiled the BBH as bullish and outlined two different ways for traders to try and benefit from what appeared to be building demand for stocks in the biotechnology group. On May 17th, we profiled a bullish call play in the BBH with the July 130 calls (GBZGF) with a stop at 118 and today we're going to raise our stop on the profiled trade to the 126 level.
Biotech HOLDRS (BBH) - $1 & $2 box
The BBH has been finding support at the $130 level and a trade at $138 would be another double top buy signal and could have the BBH trying to once again test upward trend. In the past, the BBH has had a habit of trading at least two boxes above trend before it reverses into a column of O's. Should that happen near-term, we'd expect a move to the $146 level as a possibility.
On May 21st, I also wrote up a possible traded regarding the BBH LEAPS puts. The same principles for raising stops in that trade can also be used. Subscribers can visit the archive sections for my commentary on that trade for a background of how the trade was set up and how it could be managed. I would still think this type of trade would still be in play for those traders that like to sell LEAPS puts and buy a protective put. The main thing to keep in mind regarding the sale of deep in the money puts, is to sell them on stocks that have based and are breaking out of their bases. If you keep getting assigned on stocks that you're selling deep in the money puts on, then listen to the MARKET. If the market is willing to assign you, it is probably telling you it wants the money from the assignment so it can go elsewhere until a turnaround looks more certain.