Assuming we can pull off a bounce from here and I mean, "Assuming" since the IWM is back inside the range and has closed the door on the bull-trap that the Crazy Ivan shakeout was to set up, keeping in mind that failed moves create fast reversals; such as the 15th and 16th of December below the range and the almost instant pop the next day nearly above in a single day (what the IWM couldn't do in 6 weeks). Or the recent move above the range of approximately +2.4% in 7 days and a -3.20% drop in only 4 days.
This is what I'm talking about in using short term price strength when you have big picture divergences that contradict that short term price strength. Thus on a bounce, NASDAQ Biotechs look like an interesting short or add-to position in to any upside price strength giving you a better entry and lower risk.
First the daily chart of IBB, NASDAQ Biotechs didn't perform that bad today on a relative basis.
More importantly, note the week long range and clear resistance, that's an attention getter, the same concept as the macro IWM 6 week range that we are working our way through. That clear resistance range should pull in new buyers on a breakout above defined resistance, thus this looks like it could be an interesting short on some price strength.
Again, this is a smaller micro version of the 6 week IWM range and resulting bull trap and downside reversal.
We need to know what the probabilities of a breakout are and how supported such a move might be and what the probabilities of distribution in to such a move might be so I'm looking at multiple time frames and multiple assets, IBB, the NASDAQ Biotech ETF, BIB the 2x long NASDAQ biotech ETF and BIS, the 2x short NASDAQ biotech ETF.
The 1 min IBB has a recent 1 min positive divergence, it looks like it's going to go for an upside breakout through the clear defined resistance area.
As confirmation, the 3 min BIB (2x long bios) is also showing a positive divergence.
I doubt this would happen without NASDAQ 100 and broad market support, a bounce.
Even the 5 min BIB (2x long) has a positive divergence so it looks like the intention is there, thus giving us a better short entry level with less risk, but would it likely be a head fake move and fail as the signals showed us in advance for the IWM and broad market?
This 10 min BIB trumps all other timeframes above, it doesn't negate what they are showing, but it essentially says, when the near term stuff is done, this is the direction of highest probability and with a leading negative divergence that is down.
The 2x short bios, BIS is one you might be interested in buying long for short exposure at 2x leverage rather than shorting IBB, it's 10 min chart is leading positive, thus confirming the BIB 10 min chart's negative divergence above and probabilities.
The 30 min BIS (2x short bios) has a huge leading positive divergence through it, this is higher probability than anything above and agrees with the 10 min chart. Thus far this tells us near term probabilities for a bounce above resistance are good, but the chances of that bounce holding are very poor, thus making entering on strength an advantage.
Confirming with the original IBB 60 min chart, it too is leading negative, again more confirmation that a short term move above resistance would fail and thus offer you an advantage in entering a short on such short term price strength.
The 2x leveraged BIB long's 2 hour chart shows the entire cycle from stage 1 base/accumulation to stage 2 mark up to stage 3 top/distribution and this is the strongest chart at 2 hours, again confirming every chart since the 10 min.
This is what I mean by using short term price strength to your advantage and let the trade come to you, I'd either short IBB on a move above or enter the 2x short, BIS on a move below its range or above the range of IBB/BIB.
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