A Technical Test For A Big Biotech ETF

The still struggling iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotechnology exchange traded fund, is facing some critical technical resistance that could determine the ETF’s near-term fate.

After rallying late in the first quarter and to start the current quarter, it looked liked as though biotechnology stocks and exchange traded funds were shaking the doldrums that have plagued the group dating back to last year.

Related: A Biotech ETF Proving Immune to Hawkish Fed Policy Changes

Biotechnology ETFs should also prove immune to hawkish changes in Fed policy. A recent study by Deutsche Bank indicates major biotech indexes have negative correlations to changes in 20-year U.S. government bonds. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.

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 Hillary Clinton’s Twitter feed.

Related: Hit The Lab With These 17 Biotech ETFs

IBB “reached an all-time high in July 2014, briefly touching the $400 level, but since then it has made a volatile series of lower highs and lower lows. Over this time, there have been two failed attempts to consolidate around key levels of horizontal support, and a third attempt is currently in progress,” according to TheStreet.com.

Even with a potentially challenging technical outlook, there are some positive fundamentals for IBB and other biotech ETFs.