May 18, 2010
Shares of the ETF Biotech HOLDRS (AMEX: BBH) have reached support levels that may lead to higher highs in coming weeks.
Biotech HOLDRS closed at $92.67 on Monday, May 17, after reaching $91.18 intra-day. This intra-day low is the 50% retracement of the entire March 2009 to March 2010 advance.
On May 6 and May 7, the mini-crash days of two weeks ago, the intra-day lows were below this support level but on both days Biotech HOLDRS was able to rally and close above it.
Considering current market conditions, with high volatility each day, this trade has increased risk, but with a buy stop below $88.00, the 61.8% retracement support level, to manage risk on the downside, this is trade with bullish potential.
On the upside, Biotech HOLDRS could reach $98.58 to $100.71 a share in a short-covering rally. Any rally though could have a limited time-frame as the stock market in general may have more downside ahead.
Disclosure: The Fibtimer.com (www.fibtimer.com) ETF Timing Strategy holds a position in Biotech HOLDRS.