In this article I will share some quick thoughts on the Biotech sector ($IBB) and Tesla Motors ($TSLA). Using technical analysis I believe these tickers provide potentially profitable trade set-ups.
Biotech Sector ($IBB)
Biotech stocks have been in a massive rally as of late. According to an analysis by Credit Suisse, Biotech has been the best performing sector for 5 years in a row. A feat no other sector has been able to pull off. However, the technical positioning of the Ishares Nasdaq Biotechnology ETF gives me reason to believe that a correction may be imminent for Biotech stocks.
It looks like $IBB has made an exhaustion rally, culminating in the blow-off top we saw in March (purple circle). Which was quickly followed by steep drop in price. This plunge was on very high volume (purple square), which reinforces the view that a short-term top is in place. The recent price action seems quite anemic.
As a result, I believe that $IBB will trade lower in the coming weeks. My short-term target is the support zone at $300.
Tesla Motors ($TSLA)
Tesla has been grinding lower for the past quarters. However it seems that $TSLA might have formed a bottom. I come to this conclusion, by looking at the horizontal support that has formed at $180. This assumption is supported by the RSI and MACD indicators, which show a clear positive divergence. Furthermore, we have seen upside price action on high volume (purple squares), which is a bullish omen for the stock.
It seems that the stock has broken thru the descending trend line. This upside move was on higher than average volume, which gives me conviction that the upside move is genuine. It is my believe that $TSLA will trade higher in the coming weeks. My short-term target for the stock is the resistance zone at $230-$240.
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Simon is the CEO and Editor-in-Chief of Foresight Investor. He has been following the markets passionately for over 7 years.