More Upside Possible for Biotech ETF

ETF Trends

From its Feb. 25 to its April 14 lows, the iShares Nasdaq Biotechnology ETF (IBB) tumbled 21.2%.

That fits the definition of a bear market and IBB’s decline, along those of the other biotech ETFs, received ample attention due in large part to talk that the biotech sector’s usually frothy valuations had become too extended relative to their rich historical averages. [Biotech ETFs Hold Their Breath]

But IBB, the largest biotech ETF by assets, has surged 8.3% since April 14 and some analysts believe the fund has more upside ahead of it.

Oppenheimer technical analyst Ari Wald said IBB’s near-term strength can continue, Tomi Kilgore reports for the Wall Street Journal, citing an Oppenheimer note.

During IBB’s decline, the ETF only briefly violated its 200-day moving average on its daily chart and as the weekly chart shows, the ETF’s move below the 50-week line was short-lived.

“We expect IBB to break above $235 resistance and trade higher in the coming weeks,” Wald said, according to the Journal. A move above that resistance area could take IBB back to the $255 area.

There are always potential catalysts, emphasis on “potential,” for the biotech sector, be it FDA approvals or mergers and acquisitions rumors. In the near-term, IBB could get a lift from a more tangible catalyst: Earnings. This week, 64 of the ETF’s holdings, which combine for nearly a quarter of its weight, deliver earnings reports. [Big Earnings Week for Biotech ETF]

In another important, though under-reported sign, the recent biotech bounce has been widespread among ETFs. For example, the SPDR S&P Biotech ETF (XBI) , which for a time was this year’s best biotech ETF, is up 6.4% since April 14 while the Market Vectors Biotech ETF (BBH) is higher by 7% over that time. The PowerShares Dynamic Biotechnology & Genome Portfolio (PBE) is up 4.4% from its mid-April lows.

iShares Nasdaq Biotechnology ETF

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