Biotechnology exchange traded funds have rebounded from their March/April swoons, recapturing significant portions of the losses incurred during the momentum sell-off.
Even with that, some investors remain reluctant to embrace biotech ETFs as evidenced by the fact that since the start of the third quarter, only two biotech ETFs have been inflow positive. One of those funds is the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT). [A Healthy Biotech ETF]
FBT has surged nearly 12.4% over the past 90 days, helping the ETF’s technical condition improve in a big way. FBT currently resides 12.5% above its 200-day moving average and the ETF could be displaying some signals that indicate a buying opportunity is afoot.
“FBT has formed a tight consolidation above the rising 50-day MA the past six weeks. Note the declining volume during the consolidation, which is a bullish sign,” said Deron Wagner of Morpheus Trading Group. “The price action has closed above last week’s high ($83) the past two days, so a move above the two-day high should lead to a test of $85.”
FBT currently resides just pennies below $85, a level which the ETF has not closed above since early March.
FBT’s resurgence has been aided by the usual biotech catalysts, including FDA news and mergers and acquisitions rumors. For example, the ETF got a nice lift in June when shares of Vertex Pharmaceuticals (NasdaqGS: VRTX) surged more than 40% after the company said two Phase III trials for its cystic fibrosis treatment showed encouraging results. [Vertex Lifts Biotech ETFs]
Year-to-date, FBT has added $177million in new assets, more than double the inflows to the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech ETF.
Investors that want some exposure to FBT without the commitment of owning the fund outright can acquire a partial positon in the fund via the First Trust Dorsey Wright Focus 5 Fund (NasdaqGM: FV). FV holds five First Trust sector funds with FBT being the largest weigh at 22.1%.
First Trust NYSE Arca Biotechnology Index Fund
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.