The biotech sector and its popular ETF, the iShares Biotechnology ETF (NASDAQ: IBB), have lagged the overall market during the year, with its shares slightly red. However, in recent weeks, the sector has enjoyed a significant rally after bouncing off its uptrend support and now consolidating near several major Simple Moving Averages (SMA).

The recent rally in the biotech sector comes at a time of rising investor optimism and speculation in the short term. The overall market and critical sectors, like technology and finance, trade in the upper portion of their 52-week range after experiencing a significant selloff just weeks ago. 

So, if the newfound support can sustain itself and the rally in the overall market lasts, might the biotech sector shift from lagger to leader for the remainder of the year, or at the least in the short term? If that is to happen, an investor armed with a bullish biotech bias might benefit from gaining exposure to some of the ETF’s top holdings with notable recent and higher timeframe strength. 

So, let’s take a closer look at the sector and three industry-leading biotech stocks displaying notable strength in the sector. 

In Focus: The Biotech Sector 

The iShares Nasdaq Biotechnology ETF is an exchange-traded fund that aims to replicate the price and yield outcomes of the NASDAQ Biotechnology Index. This index includes biotechnology and pharmaceutical companies listed on NASDAQ that meet specific industry and eligibility criteria set by NASDAQ.

While the biotech sector ETF is negative by nearly 2% on the year, it has rebounded impressively in recent weeks. It is now consolidating in a tight range between converging moving averages. In the near term, if the ETF can break above its one-week range, with $134 acting as resistance, a push toward resistance near $138 might be the subsequent consolidation and target zone.

If a short-term breakout and further price stabilization are to occur, then biotech stocks that have outperformed on the year might continue to do so. Let’s look at three stocks that have displayed relative strength in the sector in the year.

3 Biotech Stocks Leading the Way

Regeneron Pharmaceuticals, Inc.

The IBB’s second-largest holding is Regeneron (NASDAQ: REGN), with an impressive weighting of 8.22%. On the year, the $105 billion pharmaceutical giant has led the sector notably with its almost 10% gain. And with REGN just 3.4% away from its 52-week high, continued strength in the sector might nudge the stock to new heights. Conversely, a move high in REGN could result in upward momentum for the sector. Analysts favor REGN, with a moderate buy rating based on twenty analyst ratings and a price target predicting almost 2% upside.

Moderna, Inc.

Shares of Moderna (NASDAQ: MRNA) have significantly outperformed the sector and market year-to-date, up over 22%. From a technical analysis perspective, the stock doesn’t appear to be slowing down. MRNA is in a firm uptrend and trying to break out of a short-term consolidation with clear momentum to the upside. Although the sentiment is leaning toward the bears, with a considerable short interest and recent insider selling, should the overall sector continue its move higher, MRNA could continue to outperform, given its recent momentum.

Vertex Pharmaceuticals, Inc.

Vertex Pharmaceuticals (NASDAQ: VRTX) is the third-largest holding of the sector ETF, with an 8.06% weighting, making it an influential sector stock. VRTX has slightly outperformed the sector with its almost 3% gain this year. The stock has held an impressive uptrend for several consecutive years and is now just 7% away from its 52-week high. Having recently broken its short-term bullish consolidation, a move toward the high $430s shouldn’t be ruled out.