On a lethargic day for U.S. stocks, some health care and biotechnology exchange traded funds continue to make new all-time highs.
Although each is now trading slightly on the day, the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), Market Vectors Biotech ETF (NYSEArca: BBH) and the ProShares Ultra Nasdaq Biotechnology (NasdaqGM: BIB), the double-leveraged equivalent of IBB, have hit new all-time highs.
Last Thursday, five of the six bullish biotech ETFs hit all-time highs, a feat the group would duplicate last Friday. Arguably conspicuous by its absence from the biotech ETF all-time high club has been the SPDR S&P Biotech ETF (NYSEArca: XBI). [New Highs for Biotech ETFs]
XBI, which is locked in a tussle with the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) for the title of second-largest biotech ETF, is not for off its previous high set in February. That could be a sign the equal-weight biotech offering could be ready to resume a leadership position within this high-flying genre of ETFs.
“Year to date, however, XBI is number two (biotech ETF) with a gain of 28.4%. XBI hit a closing high of 170.66 in Feb of 2014 and after a pullback in the spring has been on in uptrend and is nearing the Feb. highs. It recently crossed above an up-trending support line which is just below $155,” said Street One Financial Market Technician Dave Chojnacki in an email to ETF Trends.
However, it appears that investors need some convincing that XBI is the place to be among biotech ETFs as it is the only one of the five non-leveraged biotech funds to lose assets this month. Those outflows belie XBI’s strong technicals.
XBI “also sits comfortably above its short term and long moving averages(see chart). Since the middle of October it has been on a meteoric rise, confirmed by its MACD crossing above signal. It is nearing near term over-bought levels as exhibited by its RSI. The short term trend line should provide resistance just near 170. This is also in the area of the 52 week high and should provide formidable resistance,” said Chojnacki.
XBI still possesses a long-standing advantage that has previously and could again prove to be a strong fundamental catalyst for the fund. A weighted average market value of $9.3 billion underscores the fact that this ETF is not overly dependent on biotech’s “big four” — Celgene (NasdaqGS: CELG), Amgen (NasdaqGS: AMGN), Gilead Sciences (NasdaqGS: GILD) and Biogen Idec (NasdaqGS: BIIB) – as primary drivers of returns.
Rather, XBI’s exposure to smaller biotech names gives the ETF leverage to the industry’s new drug approval and takeover cycles. Those factors have already lifted XBI on multiple occasions in 2014. [Puma Pumps up Biotech ETFs]
SPDR S&P Biotech ETF
Chart Courtesy: Dave Chojnacki, Street One Financial