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Looking to play some history short-term

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The markets will be closed on Monday in observance of President's day, but I'm thinking a short-term bullish trade in the underlying Biotech HOLDRS (AMEX:BBH) is at hand to try and play some market history.

According to the Stock Trader's Almanac, the markets have been bullish 6 out of 8 times following the President's Day weekend. With the Biotech Index (BTK.X) getting a bit of a bounce from retracement support at the $493 level today, this would be a trade that I think offers the short-term equity trader some gains ahead of this weekend and early next week.

Biotech Index (BTK.X) Chart - Daily Interval

We don't like to try and buy options on an option expiration day, let alone just before a 3-day weekend when time erosion is a little steeper. However, the biotech HOLDRS may be a near-term bullish play as this sector turns green and its "tech-like" moves can create some good price action. I like the way the BTK.X held retracement at 61.8%, or $493.69 and a bullish bounce based off of market history makes for a decent risk/reward trade in the BBH. All I would do is set a stop just below today's low, and target the $528 level in the BTK.X near-term, which would be pretty close to a BBH of $123. If things get overly bullish after the 3-day weekend, we could see both the BTK.X and BBH make a move to their higher 200-day moving averages. This would be for short-term traders looking for a relatively low risk bullish trade.

Jeff Bailey
Senior Market Technician
Option Investor

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