NEW BULLISH Plays
S&P Biotech ETF - XBI - close: 61.82 change: -2.53
Stop Loss: 58.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 07, 2016
Time Frame: 3 to 4 weeks
Option traders: exit prior to February option expiration
Average Daily Volume = 4.3 million
New Positions: Yes, see below
The last six months of 2015 were rough on biotech stocks. The XBI fell from $90 to $70 (a -22% drop). The selling pressure has accelerated in 2016. This ETF is already down -12% this year (last four days) and down -13.5% from its late December 29 high.
Normal volume is about 4.3 million shares a day. The current sell-off has seen volume picking up and today volume hit 11.6 million shares. We suspect the XBI is nearing a short-term selling crescendo and will see a sharp bounce back. When the broader market bounces the biotech stocks should outperform to the upside.
Today's intraday high in the XBI was $63.35. We are suggesting a trigger to launch small bullish positions at $63.40. Biotech stocks are volatile so we want to limit our risk by using small positions. Readers should consider this a more aggressive, higher-risk trade.
Nimble traders may want to take a different approach. The $60.00 level should be major support for the XBI. If you're nimble enough you could try and buy a dip (or a bounce) near the $60 level instead but this is an alternative strategy. Officially the newsletter is listing a trigger to launch bullish positions at $63.40.
Trigger @ $63.40 *small positions to limit risk*
- Suggested Positions -
Buy the XBI @ $63.40
- (or for more adventurous traders, try this option) -
Buy the FEB $65 CALL (XBI160219C65) current ask $2.65
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike