ETFs Investors Skittish About Near-Term Outlook of Biotechs

The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech exchange traded fund by assets, lost nearly a quarter of its value in the first quarter. Some other biotech ETFs turned in worse performances and that has investors skittish about the near-term outlook for the once red-hot biotech space and its ETFs.

Multiple factors, including politics, have hampered IBB and its peers. Election year posturing over drug prices represents a significant headwind for the healthcare sector and that is something biotech ETFs like IBB have already proven vulnerable to. Just go back to September 2015 and refer to Hilary Clinton’s Twitter feed.

Investors who are closely watching the presidential race will want to keep an eye on Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.

But with controversy high, investors may be have the opportunity to enter an ETF like IBB at far more favorable pricing than was available a year ago.

“Mr. Market is helping here to possibly right the ship. It is necessary to stress possibly, at this point. We haven’t seen the recovery in biotechs like we have in the larger indices. This one is truly turning a cargo ship or a freight train,” according to “The good news is we’ve seen a halt in the declines and now have what I view as a tradable pattern. The wedge pattern here aligns resistance with the 50-day simple moving average (SMA). The middle of the wedge aligns with the 10-day SMA, so there are two very clear levels to watch and they are not far apart.”