ETFOptimize | High-performance ETF-based Investment Strategies

Quantitative strategies, Wall Street-caliber research, and insightful market analysis since 1998.


ETFOptimize | HOME
Close Window

Biotech reversal confirmed: what's ahead for the IBB?

IBB Biotech ETF

The biotech sector, iShares Biotechnology ETF (NASDAQ: IBB), has enjoyed steady buying lately, closing in the green for seven consecutive days. The recent rally comes after the sector ETF broke out of a tight consolidation after sharply bouncing from its 52-week low.

Buyers have stepped in since the ETF made a new 52-week low in late October. Since then, it has rallied almost 10%. Notably, the IBB has a 52-week range of $111.83 to $138.26. In just over four weeks, the sector ETF has traded from the low end of that range to the mid-point.

IBB stock forecast

However, despite its recent impressive display, the ETF is slightly negative year-to-date, down 5.12%. Interestingly, after the ETF broke lower in September from its significant consolidation on the daily, it made a new 52-week low, but the ETF is now back above that critical level.

So, will the short-lived move lower in the ETF result in a fast move higher?

Technical overview of the IBB

The iShares Biotechnology ETF is an exchange-traded fund that aims to match the performance 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. The ETF seeks to replicate the price and yield outcomes of this index.

The ETF has $6.67 billion in assets under management, offering a dividend yield of just 0.26% and a net expense ratio of 0.44%. Therefore, one might safely assume it’s an ETF most suitable for a growth-minded investor instead of a value- and dividend-focused investor. 

Its holdings' geographic exposure is predominantly in the United States, with a 97.1% exposure to the region. Regarding sector exposure, the ETF is mainly exposed to the healthcare sector, with an 85% exposure.

Top IIBB holdings

Keeping an eye on the major holdings of the IBB is essential as they have significant influence over the ETF's price and momentum, thereby impacting the sector. Powerful movements or volatility within these holdings can also influence the overall sentiment of the sector. So, not only is it crucial to gauge the relative strength and weakness of the biotech sector compared to others, but it’s also vital to pinpoint relative strength and weakness within the sector's top holdings.

Failed move lower might result in a significant move higher

IBB Price chart

Although the ETF is still negative year-to-date, an interesting development has recently occurred. In September, the stock broke below a key support level at $124 and traded significantly lower, making a new 52-week low.

However, since making that new 52-week low, the stock has reversed sharply and reclaimed previous support. From a technical analysis perspective, the reversal is bullish and if the ETF can hold firm above $124, momentum might be shifting on a higher time frame.

The short-term trend of the sector is firm to the upside, with the IBB trading above its 20 and 50-day Simple Moving Average. However, for a higher time frame trend shift to be confirmed and gain some legs, the ETF must reclaim its 200-day Simple Moving Average, which is near $126.

Stock Quote API & Stock News API supplied by www.cloudquote.io
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms Of Service.


 

IntelligentValue Home
Close Window

DISCLAIMER

All content herein is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor should it be interpreted as a recommendation to buy, hold or sell (short or otherwise) any security.  All opinions, analyses, and information included herein are based on sources believed to be reliable, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. We undertake no obligation to update such opinions, analysis or information. You should independently verify all information contained on this website. Some information is based on analysis of past performance or hypothetical performance results, which have inherent limitations. We make no representation that any particular equity or strategy will or is likely to achieve profits or losses similar to those shown. Shareholders, employees, writers, contractors, and affiliates associated with ETFOptimize.com may have ownership positions in the securities that are mentioned. If you are not sure if ETFs, algorithmic investing, or a particular investment is right for you, you are urged to consult with a Registered Investment Advisor (RIA). Neither this website nor anyone associated with producing its content are Registered Investment Advisors, and no attempt is made herein to substitute for personalized, professional investment advice. Neither ETFOptimize.com, Global Alpha Investments, Inc., nor its employees, service providers, associates, or affiliates are responsible for any investment losses you may incur as a result of using the information provided herein. Remember that past investment returns may not be indicative of future returns.

Copyright © 1998-2017 ETFOptimize.com, a publication of Optimized Investments, Inc. All rights reserved.