The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, is higher by 9% over the past month and that is just one sign that the once downtrodden biotechnology group is rebounding.
As IBB and rival biotech ETFs have recently been gaining momentum, perhaps a sign that the group is putting election year rhetoric behind it, more traders have been sounding bullish tones on these funds, pointing to favorable fundamental and technical scenarios.
Investors who are closely watching the presidential race will want to keep an eye on Democratic nominee Hillary 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.
SEE MORE: BBP – An Outperforming Biotechnology ETF
Rare are the occasions that biotechnology stocks and exchange traded funds are seen as offering value. In fact, the sector historically trades at multiples that are elevated relative to broader benchmarks, but in a year of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.[related_stories]
“On a daily chart of the IBB, Andrew Keene points out that the ups and downs in biotech show that $300 is an important level for the ETF. That price has served as a level of resistance, the trader said, but could soon change into a level of support,” according to CNBC.
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.
“So how high can biotech go? Keene points to the IBB’s weekly chart for an answer. With the 100-week moving average crossing the 50-week moving average at $320, he believes that $320 is where IBB can sit by year’s end. That would represent an 11 percent rally from Wednesday’s closing price,” reports CNBC.
For more information on the biotech sector, visit our biotechnology category.
iShares Nasdaq Biotechnology ETF