Biotech Scenarios

As the Biotech Holders (BBH | Quote | Chart | News | PowerRating) pull back, a couple of situations could develop. Each scenario hinges on a key Fibonacci price support zone.

Scenario 1: Code name "Bio Bull"

This scenario is based on the assumption that we have begun a new uptrend which is justified with the price activity since July 11 as this ETF has made higher highs and higher lows. The previous two declines were 8 and 9 points respectively, so the pullback we are currently experiencing from the August 22 high, which is right at 8 points is very healthy and needed. In fact, this pullback is facing a key price support zone from 80.40-83.97 with six Fibonacci levels. If this zone holds, I would consider taking long trades with my stop just below the support zone, and look for at least a test of the highs we made just a couple of days ago.

Scenario 2: Code name "Bio Bust"

This scenario is based on the fact that three trading days ago we ran up into an extremely large and intimidating Fibonacci price resistance zone on the daily and weekly charts. This price resistance zone extends from 92.67-107.84. If this resistance zone is the major force on price, our support zone from 80.40-83.97 will broken with relative ease providing further evidence we could make lower lows in this ETF.

Good night!

Derrik