Still saddled with a three-month loss of 14%, the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB) has been noticeably less bad over the past month. The largest biotech ETF has traded modestly higher over that time.
While IBB is behaving less poorly than it did in the back half of February and throughout March, the ETF still resides 17% below its 52-week high. That could be a sign investors should still exercise some caution with biotech stocks and ETFs in the near-term.
“IBB remains weak and hasn’t budged much since the sharp bounce off the lows in late April. The daily chart below shows resistance of its downtrend line, while the 50-day MA is also declining towards the price (which will provide additional resistance when it converges),” notes Deron Wagner of Morpheus Trading Group.
IBB, last year’s top-performing health care ETF, is just 2% above its 200-day moving average. The fund currently labors below $229, though other technical analysts have said if iBB can clear resistance at $235, it could run back to $255. [More Upside Possible for Biotech ETF]
“Note that the bounce off the lows only managed a 38.2% Fibonacci retracement of the last wave down. This suggests that the downtrend is strong and should resume once the current consolidation is over,” said Wagner. “Look for the price action in $IBB to turn ugly, with a close below the two-week low and 40-week MA.”
Biotech weakness has been a modest drag on broader health care ETFs as the Health Care Select Sector SPDR (NYSEArca: XLV) has traded slightly lower since the start of the second quarter while losing $30 million in assets.