Biotechnology stocks and exchange traded funds have been under pressure in recent days following presidential candidate Hillary Clinton’s comments about pharmaceuticals industry price gouging.
The First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), the second-largest biotech ETF by assets, has not been immune to that trend and is off more than 5% over the past week. FBT holds just 30 stocks, making it one of the smallest biotech ETFs in terms of number of holdings. The ETF’s constituents include Regeneron (NasdaqGS: REGN), Gilead (NasdaqGS: GILD) and Celgene (NasdaqGS: CELG).
FBT tracks the NYSE Arca Biotechnology Index. That index “is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services,” according to First Trust.
FBT has surged 200% over the past five years and is the top-performing non-leveraged ETF since the start of the current bull market in March 2009. [Celebrating the Bull Market With ETFs]
It is hard to say if that run is officially over, but some technical analysts believe the ETF is due for more of a pullback in the near-term.
“So what should we be watching here? Well, price has tested the underside of this important level and been unable to regain it (thus far). So we should now watch to see if this broken trend line now serves as resistance,” writes technical analyst Andrew Thrasher for See It Market. “Now let’s turn the focus to momentum, specifically the Relative Strength Index (RSI). In the top panel of the chart we can see it is trying to find its footing around a level of prior support. But, as of yet, it hasn’t been able to get up off the mat.”
While all biotech ETFs have benefited this year from a spate of Food and Drug Administration approvals and a wave of mergers and acquisitions, FBT has frequently found itself at the right place at the right time as the ETF has frequently been home to acquired companies. FBT was 2014’s best-performing health care ETF.
First Trust NYSE Arca Biotechnology Index
