By Imre Gams, analyst, Market Minute Every trader should have a few go-to setups in their toolbox… The kind that when you spot it on a price chart, you know you’re likely to score. Because for technical analysts, good trading is all about pattern recognition. Of course, it’s also important for those patterns to have predictable outcomes. But remember this – nobody ever takes a trade expecting it to be a loser. Ultimately, trading is a game of probabilities. Even the best setups will fail occasionally. So, our goal is to stack the deck in our favor as much as possible. My Favorite Chart Setup One of my go-to setups is a chart pattern called the head-and-shoulders. I like it because it’s easy to spot, and consistently allows me to spot the next change in momentum. It works in a variety of sectors, like in commodity markets, currencies, and now I’ve found one in biotech. So, today we’ll take a look at the iShares Biotechnology ETF (IBB). IBB tracks the performance of the Nasdaq Biotechnology Index. It’s mostly made up of large-cap biotech companies like Amgen (AMGN), Gilead Sciences (GILD, and Regeneron Pharmaceuticals (REGN). Now, let’s look at the head-and-shoulders pattern on the IBB price chart below… 
(Click here to expand image) I’ve outlined three key characteristics of this pattern… First, we have the left shoulder, which formed in March 2022 when IBB attempted to rally. This rally quickly stalled at around $135, leading to a sharp decline over the next several weeks. IBB finally found support around the $105 level in June, forming the head of the pattern. The market then rallied once more, eventually finding resistance back at $135. The ensuing decline found support around $113 in September, forming the right shoulder. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. | Once the two shoulders and the head of the pattern are in place, it’s possible to draw the neckline (blue line). It’s a trendline that connects the left and right shoulders. The head-and-shoulders pattern is complete once prices break beyond the neckline. For IBB, prices broke through the neckline on November 30. Financial genius reveals unusual investment strategy that works in ANY market Now that the breakout is underway, I wouldn’t be surprised to see IBB return to its November 2021 peak of $164. That’s over a 20% move from the neckline of the pattern. While my go-to head-and-shoulders pattern won’t always be on beaten-down sectors, they’re often the most lucrative. And once the trend is in motion, I can comfortably place a trade in that direction. In this case, biotech has taken a hard hit this year. So, the potential upside in IBB is quite exciting. Traders should look to go long biotech in the short term. Happy trading, Imre Gams
Analyst, Market Minute Reader Mailbag What are some of your best go-to setups on a chart? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. In Case You Missed It… The #1 stock for 2023 Investment expert Brad Thomas knows how to pick stocks. He bought Starbucks back in 2006… He bought Nike in 2003… And he and his team delivered a perfect track record from March 2020 to September 2022. Now, for a limited time, he’s revealing his #1 stock for 2023… Get its name here. 
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