The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotechnology exchange traded fund, and rival biotech ETFs have been tempting, even teasing investors with signs the group may be ready to rebound this year only to let market participants. That trend may finally be ready to reverse.
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.
In recent weeks, IBB, the largest biotech ETF, has been scuffling. The same can be said of rivals, such as the SPDR S&P Biotech ETF (NYSEArca: XBI) and the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT).
There is some encouragement at the fundamental level. The time to buy, regardless of sector, is usually when a particular group falls out of favor, not when it has been bid higher by scores of investors. Some investors view that as the case with the broader healthcare group and biotechnology in particular.[related_stories]
Piper Jaffray technical analyst Craig Johnson said of IBB in an interview with CNBC that the ETF is nothcing “a series of higher highs and higher lows coming off the recent lows here in that particular index.”
Aggressive traders willing to bet on more downside for biotech ETFs can consider the following leveraged funds: The Direxion Daily S&P Biotech Bear Shares (NYSEArca: LABD), ProShares UltraPro Short NASDAQ Biotechnology (NasdaqGM: ZBIO) and the ProShares Ultrashort Nasdaq Biotechnology (NasdaqGM: BIS). BIS and ZBIO track the same index as IBB.
The improved outlook for the health care industry comes as many expect continued growth in the sector, despite an ongoing so-called earnings recession in the S&P 500. While FactSet anticipates the broad S&P 500 to show an earnings decline of -9.1% for Q1 2016, the health care sector is expected to report revenue growth of 8.9%.
“Stifel Nicolaus portfolio manager Chad Morganlander points out that investors can’t ignore biotech’s big companies, as opportunities are starting to present themselves. Looking at the biggest names in the group, Morganlander believes that Amgen is still a safe bet,” according to CNBC.
Amgen (NasdaqGS: AMGN) is one of IBB’s largest holdings.
For more news on Biotech ETFs, visit our Biotech category.
iShares Nasdaq Biotechnology ETF